Media Oversight: Transfer of Responsibilities
	 — 
	Question

Lord Whitty: To ask Her Majesty's Government whether they will reconsider their decision to transfer responsibility for media, broadcasting, digital, telecommunications and oversight of Ofcom from the Department for Business, Innovation and Skills to the Department for Culture, Media and Sport.

Baroness Garden of Frognal: My Lords, there are currently no plans to do so.

Lord Whitty: My Lords, I thank the Minister for that rather disappointing reply. I think the House and the world understand why, in the BSkyB case, the Prime Minister had to remove responsibility from a Minister who appeared to be prejudiced in one direction and give it to a Minister in a different department who we now know to be prejudiced in another direction. However, that is not my point. At the same time, and with no logic, the Government transferred whole swathes of responsibility not just for BSkyB and broadcasting but for media as a whole-digital, telecommunications and oversight of the key regulator, Ofcom. Why was that done and who has benefited? It is not clear to me that consumers, small businesses hoping to compete, or the public interest have benefitted. Surely competition and consumer protection should be paramount.

Baroness Garden of Frognal: My Lords, the noble Lord makes some valid points and I acknowledge his expertise in consumer matters, which will of course inform his views. However, he will appreciate that there are many aspects of government in which more than one department has an interest. The Department for Culture, Media and Sport is an economic-focused department, so it makes a great deal of sense to bring together for the first time the full value chain of the technology industries-the infrastructure, content regulation and the creative industries-in one place. It is, after all, the department for media.

Lord Fowler: My Lords, perhaps I may remind the noble Lord that it was the last Government who deliberately changed the law in 2003 to allow foreign takeovers of British television companies and thus enabled BSkyB to make its bid. I put it to my noble friend that in future it would be better if, irrespective of whichever party is in power, politicians were removed altogether from taking the final decision in media takeovers.

Baroness Garden of Frognal: My noble friend makes a powerful point, which I know he has made before. This is being treated extremely seriously by the Government. We are currently looking at various reviews, not the least of which is the Leveson inquiry, which will focus on this. I am sure that decisions will be taken in due course.

Lord Sugar: My Lords, first, I declare an interest as the chairman of YouView, a non profit-making organisation that was announced yesterday. It provides a new system of broadcasting television for the UK made up of all the publicly funded broadcasters. The point I would like to bring to the noble Baroness's attention-

Noble Lords: Question!

Lord Sugar: I will get there if noble Lords give me a moment. Is it not irrelevant where the responsibility lies for looking after this sector? What is perhaps more relevant is ensuring that the people who work in the department are qualified and understand what this business is all about. It is a dynamic and fast-moving sector. The company that I have just referred to will provide individuals with opportunities to start their own television channels. We do not need bureaucrats who do not understand this dynamic industry.

Baroness Garden of Frognal: My Lords, the noble Lord has of course a great deal of experience and expertise in these fields, which is why I come back to the answer that I gave to the noble Lord, Lord Whitty: that it makes a lot of sense to deal with all these issues within one department, which is called the department for media and where expertise from officials resides. That is more likely to be helpful to all the creative industries.

Lord Northbourne: My Lords, can the Minister give us any encouragement to believe that an element of social responsibility will be part of the work of the Department for Culture, Media and Sport in being responsible for the media?

Baroness Garden of Frognal: I would sincerely hope so, my Lords. Social responsibility is written into all government policies across all departments, and DCMS is certainly involved in that.

Baroness Bonham-Carter of Yarnbury: My Lords, DCMS is a small department that punches way above its weight. Indeed, the creative industries are the fastest growing sector in the economy. Does the Minister agree that, as broadcasting is a key factor in this part of the economy, it and all things pertaining to it should remain within the DCMS?

Baroness Garden of Frognal: I entirely agree with my noble friend that DCMS supports and encourages the creative industries, and I join her in celebrating all that those industries bring to this country. They make an enormously important contribution, not just to the economy but to the cultural richness of the country and, indeed, to the UK's standing on the international stage, where we are world leaders in many areas of the arts and media.

Baroness Jones of Whitchurch: Does the Minister recognise that the events of recent weeks mean that Jeremy Hunt no longer commands the confidence of the media or the public in dealing with media regulation? How much longer will the department be expected to limp along with a Secretary of State in limbo waiting for a reshuffle? Do not the arts, culture and sports organisations in this country need better leadership?

Baroness Garden of Frognal: Harsh words indeed from the noble Baroness. I cannot possibly agree with her that Jeremy Hunt is a lame duck Secretary of State. He continues to run a department with important and high profile responsibilities. He is highly regarded within the fields that he covers. Nor can we forget that one of his responsibilities is for the Olympics and Paralympics, which are about to be of major significance in this country.

Lord Hughes of Woodside: Does the Minister share, at least in part, my rather old fashioned view? One of the reasons why we are in such a mess, not just in the broadcasting industry but in many other things, is that years ago Parliament abrogated responsibility for taking decisions and passed it on to so-called independent quangos.

Baroness Garden of Frognal: I am not entirely sure that I agree with the noble Lord. Parliament still has the ultimate responsibility for what goes on in the country in these different areas, particularly in the field of media, which we are discussing today.

Lord Foster of Bishop Auckland: My noble friend's words were not harsh enough. We have a weak Prime Minister. He should have called for Jeremy Hunt's resignation immediately he discovered there was a problem. That is the problem; we have a weak Prime Minister who does not have the courage to do the right thing.

Baroness Garden of Frognal: Once again, I am afraid that I cannot agree with the noble Lord, which will not surprise your Lordships. Jeremy Hunt has actually held himself accountable to Parliament. He has also given evidence to the Leveson inquiry. A whole deal of evidence is coming out on this and we have to wait until the Leveson inquiry is finished before we can pass any sort of judgment.

Women's National Commission
	 — 
	Question

Baroness Greengross: To ask Her Majesty's Government whether they have any plans to create a representative body to replace the Women's National Commission, which was abolished in 2010.

Baroness Verma: My Lords, let me start by recognising the many achievements of the Women's National Commission over 40 years of service. However, the Government feel that it is now both important and appropriate to engage with women more directly and much more widely. It is for that reason that we decided to close the WMC in 2010 and bring its functions into government. I am very pleased to report that our new approach is working well and that the feedback that we have had is very positive.

Baroness Greengross: I thank the Minister for that reply, and I know about her personal commitment to hearing the voices of women, particularly the more marginalised groups of women. However, does she not think that we need some sort of central hub, some replacement organisation, that can bring together the voices of those who tend not to be heard and who are marginalised. Also, could the Government not be in breach of their obligations under the Beijing platform for action, which requires them to have in place a mechanism that will enable women's organisations to communicate effectively with government at a national level?

Baroness Verma: My Lords, I thank the noble Baroness for her initial kind words, but perhaps I may reassure her and the House that we are, first of all, meeting the obligations under the Beijing platform because, through the Government Equalities Office, which is part of the Home Office, we are able to deliver all the requirements placed on this country to ensure that all voices are heard. However, we took on this programme on the basis of listening to people's voices through a large consultation called Strengthening Women's Voices. We found from the feedback that our approach is what women actually want.

Baroness Browning: My Lords, I declare an interest as a former government co-chairman of the Women's National Commission. Does my noble friend accept that the strength of having a government Minister as co-chairman was that the commission set its own agenda-in other words, its priorities were at the top of the list and were not set by other people or government? Having a government Minister as co-chairman meant that those concerns went directly to the heart of government. That was the WNC's strength-a strength that is no longer there.

Baroness Verma: My Lords, I am afraid that I have to disagree with my noble friend because, having spoken to many women through consultation, we found that a lot of women were not being talked to or involved in the sort of decisions that my noble friend would want. Also, because of social media and the internet, we are able to reach out far more to a greater number of women and women's organisations. The fact that the Government are at the heart of this is the key to addressing those issues.

Lord Rooker: What is the gender of the head of the Government Equalities Office?

Baroness Verma: My Lords, I am not quite sure that I can understand the noble Lord's question, but I should say that we have a Home Secretary and a Minister, Lynne Featherstone, who lead on this area in the departments.

Lord Rooker: My question was simple.

Noble Lords: No!

The Lord Bishop of Blackburn: My Lords, an LSE study calculated the public cost of carers leaving work to be £1.3 billion a year in lost tax revenues. It is well understood that women bear the heavier responsibility than men in this regard. What steps are the Government contemplating to ensure that the voices of women carers are heard, as they would have been through the Women's National Commission before its demise?

Baroness Verma: My Lords, the right reverend Prelate talks about a group within society who perform an incredibly important role. However, perhaps I may also say to him that when taking on board what carers do, whether they are paid or unpaid, we have looked at flexible working, which will have a greater impact on their lives. We have also taken 2 million people out of tax altogether to ensure that they do not bear the great brunt of the effects of our economy going into a downward spiral because of our previous Administration. We are working very hard to ensure that our tax credits will be utilised for those with the most disadvantage in our society.

Baroness Trumpington: My Lords, who is representing this country in the United Nations? I speak having had an interest as being a member of the Women's National Commission when the United Nations Decade for Women conference was held. It was important that we were represented properly then. I represented many English organisations, including the trade union for English prostitutes.

Baroness Verma: My Lords, we have an excellent UN ambassador in New York. We also have our own Minister, Lynne Featherstone, who leads on all our international issues overseas, so we have really good representation. In fact, we had the largest contingent at the last CSW session.

Baroness Gould of Potternewton: My Lords, one of the strengths of the Women's National Commission as a representative body of over 670 organisations was that it was able to deal with specific issues. As the Olympics are almost upon us, what action have the Government taken to follow up the extremely valuable work done by the Women's National Commission, along with the Metropolitan Police and the London boroughs, to reduce the level of trafficking in order to reduce the level of prostitution during the Olympics? Will the Minister tell us what action was taken and the outcome of that action?

Baroness Verma: My Lords, the noble Baroness raises concerns that we also have about the trafficking of women, but I reassure her that all these considerations have been taken into account. We are working across government on these issues. Would the noble Baroness allow me to give her and the House a fuller answer by writing to her? There are a number of areas that we are looking at and working on and it would be helpful to the House.

Universities: VAT on Alterations to Listed Buildings
	 — 
	Question

Baroness Deech: To ask Her Majesty's Government what evaluation they have made of the impact on universities of the removal of the zero rate of VAT for alterations to protected buildings.

Lord Sassoon: My Lords, removing the zero rate of VAT from alterations to listed buildings, including those belonging to universities, removes a perverse incentive to change rather than repair them and ensures that all alteration works receive the same tax treatment. The change makes the VAT rules simpler for businesses to understand and reduces the scope for error and non-compliance. In the Government's assessment of the impact of the measure included in the consultation response published on 28 June, no separate assessment was made of the impact on particular categories of listed building.

Baroness Deech: Does the Minister fully appreciate that the proposed removal of zero-rated VAT for much needed university alterations to listed buildings will have a severe impact on those universities? Not just Oxbridge, but nearly every university old and new has listed buildings and the sector as a whole will have to find an additional £150 million over the next five years. It is like an extra tax which will reduce the amount that universities have for bursaries. Will the Minister accept that the situation could be rescued without a U-turn if the Government were to limit zero-rating to buildings owned and occupied by charities?

Lord Sassoon: My Lords, I fully accept that universities will be affected, but that is not a reason not to go ahead with this measure. It is for sound and principled reasons, which I have summarised. There has been an extensive consultation process, including my honourable friend the Exchequer Secretary meeting representatives from a number of Oxbridge colleges, including the noble Baroness's successor as principal of St Anne's College, Oxford. There have been various numbers, including numbers coming from Oxford, which seem to vary considerably, meeting by meeting. I do not therefore recognise the £150 million figure, but I accept that there is a cost. As a result of the consultation, there have been significant changes to extend the transitional period and some of the details of the transition, but the change will go ahead.

Baroness Brinton: My Lords, does the Minister believe that the additional cost to universities resulting from the removal of the zero rate should be met from their teaching and research resources, or by an additional Higher Education Funding Council grant, or should it be passed on to the occupants of student housing?

Lord Sassoon: My Lords, it will be for the universities and colleges affected to decide what they do. We have made generous transitional arrangements which give the affected institutions time to plan. Of course, the total of higher education institutions' funding will rise during the next two to three years, so there is time for those institutions to make the necessary decisions.

Lord Howarth of Newport: My Lords, if the Government are to continue with the Listed Places of Worship Grant Scheme, why do they not introduce a listed places of learning grant scheme? Better still, why do they not abandon their defeatist attitude towards the European Union and reopen vigorous negotiations with the European Commission to secure a unified zero rate of VAT for both alterations and repairs to heritage buildings?

Lord Sassoon: My Lords, on the noble Lord's first question, he makes the point that I would make: that the Listed Places of Worship Grant Scheme is a continuation of an existing scheme and not a new scheme that has been introduced. As regards his question on Europe, we need to abide by the VAT rules that Europe sets. Those rules very seriously constrain us, and the noble Lord makes the important point that we have to work within those constraints.

Lord Cormack: My Lords, does my noble friend the Minister accept that the Listed Places of Worship Grant Scheme, while it is welcome, does not address the issue satisfactorily? All buildings in the ownership of cathedrals, for instance, are not eligible for it; it is just the place of worship itself. All the heritage organisations, headed by the Heritage Alliance, have submitted evidence to his department which shows that all those who truly know and care about the future of our built heritage in this country believe that the Government have got it wrong. Can we please have a rethink on this?

Lord Sassoon: My Lords, there has been a consultation; there have been extensive discussions; and the response to the consultation was published on 28 June. Concessions have been made that will significantly help university listed buildings; for example, certain transitional repairs will be allowed to carry on for four summers. I shall not be drawn again into a discussion of listed places of worship, save to say that some of the same considerations apply. For example, anomalies in the arrangements affecting universities include the fact that those listed buildings which are used for business purposes such as teaching are already subject to VAT as are alterations to all non-listed university buildings, so there are very considerable anomalies here which we are clearing up.

Lord Eatwell: My Lords, I declare an interest as the president of Queens' College, Cambridge, which contains some of the most beautiful grade 1 listed buildings in the country. The Minister did not accept the figure of £150 million put forward by the noble Baroness, Lady Deech, so I can perhaps help him by giving him a precise figure for the impact on my institution. My senior bursar tells me that the impact of this change on my institution will be up to 5% of the teaching, research and student support budget. Was that the Government's intention?

Lord Sassoon: My Lords, the intention was to reduce a number of VAT anomalies, of which this was one, and to introduce generous transitional provisions relating to those measures.

Ulster Bank
	 — 
	Question

Lord McAvoy: To ask Her Majesty's Government what steps they are taking to ensure benefits and allowances are being paid to recipients with Ulster Bank accounts.

Lord Sassoon: My Lords, my honourable friend the Financial Secretary has spoken to Stephen Hester, chief executive of the Royal Bank of Scotland, about the technical difficulties affecting both NatWest and Ulster Bank to ensure that RBS is doing everything it can to resolve these issues as quickly as possible. Social security is a devolved matter in Northern Ireland but the Social Security Agency in Northern Ireland is advising benefit customers to go directly to their local branch where funds should be available to them.

Lord McAvoy: My Lords, I thank the Minister for his Answer but the fact remains that 100,000 customers of Ulster Bank are suffering chaos in their accounts affecting direct debits, benefits and pensions. This also has an effect on small businesses and suppliers. Vernon Coaker called for the Secretary of State for Northern Ireland to intervene but Owen Paterson says it is not his problem and he refuses to help. He holds the important position of Secretary of State for Northern Ireland. Does the Minister accept that this is a disgraceful situation where 100,000 customers and small businesses in Northern Ireland are facing financial disaster but receive no help from a do-nothing Secretary of State for Northern Ireland who is not fit for the job?

Lord Sassoon: My Lords, I do not accept that for one minute. This is a very serious issue affecting, as the noble Lord says, 100,000 individuals in Northern Ireland and the Republic of Ireland. My right honourable friend the Secretary of State for Northern Ireland has been actively on the case. He has discussed the Ulster Bank issue with my right honourable friends the Chancellor and the Secretary of State for Business. The Minister of State for Northern Ireland has spoken to the Northern Ireland Minister of Finance and Personnel and to Sir Philip Hampton, chair of RBS, who has made commitments about the fair and proper treatment of Ulster Bank's customers with full compensation for financial loss. Ulster Bank itself is putting out daily updates and extending branch opening hours and has a freephone number. These are very serious issues. Once the dust has settled, the FSA will be requiring a full explanation from RBS and NatWest to make sure that any necessary steps are taken so that this does not happen again.

Lord Rogan: My Lords, this morning a spokesman for Ulster Bank stated that this technical failure will not now be fixed until 16 July. This further delay, now to be some three weeks, will compound the already serious cash-flow problems businesses are encountering. Some companies are inevitably going to suffer losses. Does the Minister agree that this raises the question of compensation for consequential losses caused by the IT breakdown?

Lord Sassoon: My Lords, I agree that the difficulties clearly are continuing. I looked at the Ulster Bank website. I see that it is giving daily updates of the situation and it has been completely clear that it is unlikely that it is going to be fully resolved until around 16 July. I repeat that RBS has made a commitment that no business or individual will be left permanently out of pocket as a result of this. The interpretation of that will no doubt raise the issues which the noble Lord raises.

Lord Alderdice: My Lords, the situation for people in Northern Ireland is extremely serious, as my noble friend has said. The noble Lord, Lord McAvoy, has raised the question of those who get benefits, but this nationalised bank run by the Government is also failing to address the needs of those whose salaries and wages are paid in, including from the Government. A number of private sector employers are helping out their employees who find themselves in immediate financial embarrassment during this holiday season. Is there any possibility that the Government, whose own employees are failing to have their salaries and wages paid in, can help in any way in the short term?

Lord Sassoon: My Lords, my noble friend makes a very good point. I do not know what arrangements are being made because, again, it is going to be principally affecting employees of the devolved Administration. But I will take that issue back. I am sure it is being thought about by my colleagues in Government but I will remind them of it.

Baroness Kingsmill: My Lords, does not the chaos and total mess in the RBS-owned banks at the moment, which is affecting so many retail customers, just emphasise a lack of investment in back-office systems and computers in these retail banks, disadvantaging a large number of customers, at a time when we have been focusing far too much attention on what has been going on in the casino banks?

Lord Sassoon: My Lords, I do not know the cause of this significant failure. The noble Baroness may be right but, as I said, the FSA expects RBS to provide it with a complete account of the issues. I welcome the fact that the chief executive of RBS, Stephen Hester, has made a commitment to a full and detailed investigation overseen by independent experts and publication of those findings. In due course, we will know what the explanation is.

Lord Forsyth of Drumlean: My Lords, is my noble friend satisfied with the role of the FSA? Surely it is not enough for the FSA to say, "We want a report". The FSA is supposed to satisfy itself that people with banking licences have back-up systems to prevent what has happened, which is causing not only distress to families but real damage to commerce in our country. Surely the FSA should be far more active and should be giving an explanation to the Minister for why it has allowed this to happen.

Lord Sassoon: My Lords, we delude ourselves if we think that there will ever be a no-failure regime in financial regulation. Regrettably, issues will arise. We want the FSA to do what it is doing: not getting in the way but doing whatever it can to ensure that RBS solves the immediate problems. Then it will get the full explanation and, on the back of that, the lessons for all concerned, including, I am sure, the FSA, will be learnt.

Lord Browne of Belmont: My Lords, as normal banking facilities will not be available at branches of the Ulster Bank until 16 July at the earliest, and given that there are public holidays in Northern Ireland on 12 and 13 July, will the Government take steps to ensure that Ulster Bank branches remain open on those dates to enable customers to receive advice and to access banking services? I declare that I am a client of the Ulster Bank-one, I hope, of good standing.

Lord Sassoon: My Lords, I am aware that 42 Ulster Bank branches have extended their opening hours until 7 pm. I am aware, because I have checked, that the availability of the freephone number, which is available until 10 o'clock at night, has been widely publicised. I am not aware of what the bank intends to do on those bank holidays, but it will have heard the question.

Business of the House
	 — 
	Timing of Debates

Moved by Lord Strathclyde
	That the debate on the Motion in the name of Lord Jenkin of Roding set down for today shall be limited to three and a half hours and that in the name of Lord Higgins to one and a half hours.
	Motion agreed.

Public Service Provision Committee
	 — 
	Membership Motion

Moved by The Chairman of Committees
	That Lord Griffiths of Fforestfach be appointed a member of the Select Committee in place of Viscount Younger of Leckie, resigned.
	Motion agreed.

Further Education Institutions and 16 to 19 Academies (Specification and Disposal of Articles) Regulations 2012
	 — 
	Motion to Refer to Grand Committee

Moved by Lord Strathclyde
	That the draft regulations be referred to a Grand Committee.
	Motion agreed.

UK Industry: International Competitiveness
	 — 
	Motion to Take Note

Moved by Lord Jenkin of Roding
	That this House takes note of the international competitiveness of UK industry, of its success in attracting inward investment and exporting to global markets, and of its role in strengthening the United Kingdom's economy and in job creation.

Lord Jenkin of Roding: My Lords, we have had two recent debates in this House that I would like to mention, one introduced by the noble Lord, Lord Adonis, about youth unemployment on 14 June, and one introduced by my noble friend Lady Kramer on economic growth on 21 June. One key to solving both those problems is achieving the success of UK industry-by that I mean all industries-for the nation in earning its living, and that is what this debate is about.
	I immediately welcome my noble friend Lord Green of Hurstpierpoint to the Dispatch Box. He has spent so much time abroad over recent months that we do not see him often enough in this House, so it is absolutely splendid that he should be here today. He has made a notable contribution to supporting both exports and inward investment and, if I may put it this way, banging the drum for Britain.
	I should declare an interest in that I am an honorary president-I stress "honorary"-of the Energy Industries Council, which has an important role in representing over 600 companies in the supply chain of all energy supplies and securing business round the world. If I may, I will draw on its experience a little later.
	I start with a proposition with which I hope that the whole House can agree:
	"There is a growing consensus across UK Government and business that growth in manufacturing and industry is vital for the UK's sustainable economic recovery, and that technology and innovation will be key drivers of that growth".
	That will come through later in my speech and is as true for exports as for everything else. The proposition comes from a valuable report by the PA Consulting Group, which draws on a survey of over 100 business leaders from the UK's fastest-growing technology and innovation centres. The report is very well worth reading. It has proposals for a constructive and realistic industrial policy, and I draw it to my noble friend's attention. It is one of a whole raft of recent policy papers addressing the problem of how we are actually to achieve what that report sets out.
	The UK is still one of the world's major exporting countries. In its most recent inflation report, the Bank of England said that the deficit,
	"alongside other factors such as low national saving, indicates a need for the UK economy to rebalance away from domestic demand towards net exports".
	Both parts of that are important. I have been exploring how we can better achieve this objective with a few of the major bodies that aim to help in this process. I mention first that admirable body, the British Chambers of Commerce. In a letter to me about the quarter 1 results for this year, it said:
	"This quarter's Index shows that export orders and sales have increased over the last three months. Trade documentation data for UK goods exports in Q1 2012 shows an almost eight percent increase"-
	7.7%, put accurately-
	"on the same quarter last year, demonstrating that growth in export goods continued".
	The chambers have of course gone on to identify a number of challenges. I have no doubt that other noble Lords will draw attention to these during the debate, but they draw particular attention to the problem of smaller companies seeking to export for the first time. Among those, they stress the very great importance of trade missions and trade shows, which really are an effective means for new exporters to get started. However, it seems that the use by smaller firms of the state-backed finance products from UK Export Finance, which should go hand in hand with that, is mainly due to low awareness on the part of small firms of what is available. These are specialised services and it seems sad if firms are not aware of what is on offer. I applaud my noble friend for his role in restoring funding for the trade shows programme to UKTI's budget, but what more can the Government do to overcome this handicap of lack of awareness? If it really is a problem, it ought to be tackled.
	The chambers of commerce also mentioned the importance of training people in the mysteries of international trade. It is hugely complex and one must remember that it is always its people who do the actual exporting. The BCC itself does quite a lot of training but too many firms simply do not understand the need for expertise in this area. In this connection I also met a remarkable lady, Mrs Lesley Batchelor, who is the director-general of the Institute of Export. She entirely supported that. Indeed, the institute's primary purpose in life is its education programme: it runs a variety of courses on international trade. She made the point that too few companies undertake any internal training in exporting-so that, as she put it, any success becomes a matter of happenstance and not a matter of strategy. The institute's philosophy can be summed up as, "professional qualifications bring competence, and competence engenders confidence". That is at the heart of this. She went on to say that the UK has an almost psychological disadvantage. As she put it:
	"Compared with, say, Italy or the Netherlands, international trade is less embedded in the psyche of many UK firms".
	I recognise that; many years ago, I used to work for the Distillers Company, which exported almost its entire production. However, it is not true of a lot of other companies. My noble friend may well recognise that. Lesley Batchelor mentioned another problem with which we are all familiar-that the media much prefer to report problems and failures rather than successes.
	I will mention one success. So far this year 140 companies have won Queen's Awards for enterprise in international trade. Have we read anything about that? It is there; it has happened; the firms themselves are, no doubt, very proud of it. One can add to that the question, "Why do so many people spend their time talking down manufacturing in this country?". This does no service at all to industry; manufacturing is hugely important.
	In my discussions in preparing for this debate I have heard a great many praises for UKTI, the United Kingdom Trade and Investment body, which operates under BIS. There is no doubt that it does a great deal of sterling work in running trade shows, running missions overseas and encouraging foreign direct investment into the UK. I shall cite one or two examples of this; that often helps to make the point. I come back to what I mentioned earlier, in declaring my interest in the Energy Industries Council. This body, which works very closely with UKTI, has offices in Dubai, Singapore, Beijing, Rio de Janeiro and Houston, Texas. Over the three years since 2009, with UKTI's help, the EIC has managed the UK pavilion at 26 exhibitions, with 648 UK exhibitors. It has run 25 trade missions for 290 delegates. Between them these have produced millions of dollars of new business for the firms concerned.
	Then again, one can look at its activities in overseas investment projects. There is a project known as the Sadara project in Saudi Arabia; it is a $20-billion world-scale chemicals complex. The EIC ran what it called a "share fair" event in this country, and was able to build valuable contacts between the firms that could supply products and services-not just products-for the contractors for the project. Again, it is confident that millions of dollars of business will be won.
	We hear a lot about the need to break into developing markets. Here again, the EIC has a very good record. I will mention just two recent successes. They are small firms, and I am willing to bet that there is nobody in this House who has heard of either of them. I may be wrong, and I shall stand corrected. There is a small company called WMT Oil and Gas which has just been awarded a $500,000 contract to produce operations procedures for a deep-water offshore oil field in Brazil. It will be the first tension-leg well platform in Brazil, which will be connected to a floating production, storage and offloading vessel. The company produces its instructions in two languages-English and Portuguese. This is a huge success for that small firm.
	Another company, which has been breaking into the Chinese market, is called SafeHouse Habitats Scotland Ltd. Again, it was the EIC that helped it to break into that market. The company produces products such as pressurised welding enclosures and hot-work management solutions. It identified opportunities in China such as offshore oil and gas exploration products, and the EIC helped SafeHouse Habitats to make the market breakthrough. The EIC formula clearly works. It is hugely successful, and I know that my noble friend is aware of that. Can it not be imitated in other sectors of the economy? It seems to be a way to get extra business.
	I have extolled the virtues of UKTI but I have also heard criticism of it, and perhaps I should mention that. It is not always quick enough to respond to the accelerating changes in the global market. Here again I cite one example, although it may not be UKTI's fault-I think it goes deeper than that. A few weeks ago my honourable friend George Freeman, MP for Mid Norfolk, who advises my right honourable friend David Willetts at BIS, spoke to a science and innovation conference in Boston, Massachusetts, where he described the UK's life science strategy, an initiative that was launched with much publicity by the Prime Minister last year. As many noble Lords will remember, this attracted much applause from the specialist press and indeed has been warmly welcomed by many scientists and businesses that are likely to be involved. It is a very good example of this country backing a sector in which we have a world-leading position, which is what we should be doing.
	My honourable friend found that his US audience was completely unaware of the strategy-they knew nothing about it at all-even though it includes a number of measures that are directly aimed at foreign direct investment. Perhaps that is not the fault of UKTI. There seems to have been precious little publicity for the initiative since the Prime Minister's launch, and that is something that I heard echoed only last night at the Royal Society's soirée. Who is leading the initiative? Where are the industrialists who are backing it? Why has there been so little publicity since the launch? The strategy has huge promise for the UK. It is an area of high technology where we excel. We have a proud record in that: I shall mention only the UK Biobank. Now, of course, we are espousing the ground-breaking policy of open access to scientific information and network access, and when my honourable friend started talking about that to his American audience, he saw them getting out their pencils and notebooks. That should have been done before. What we need on this issue is a series of international ambassadors to sell this important initiative abroad and across the world. It has a lot to offer this country and could bring billions of pounds of inward investment.
	Contrary to the doom and gloom that is so readily purveyed by the media, we have a great deal to be proud of. Our role in international trade is widely welcomed. We have many manufacturing companies selling high-tech products and services around the world. We can attract top-quality companies to invest in this country. Of course we could do better and I made one or two suggestions as to how we might, but let us build on our undoubted successes in this area. I beg to move.

Lord Liddle: My Lords, it is a great pleasure to follow the noble Lord, Lord Jenkin of Roding, in his introduction to this debate. He brings to the subject much ministerial and business expertise, and it is greatly to his credit that he has shown a sustained interest in these questions throughout his public life. He said a lot about export promotion with which I agree. We probably share an analysis of the British competitiveness problem, which is that it is a complete myth that we are a post-industrial nation. We have many highly competitive businesses; the challenge we face is that we do not have enough of them. We need far more and the question is how we get far more. I shall focus my remarks on how the public policy framework can help, and also talk briefly about the questions of the exchange rate and our commitment to Europe and the single market, which is of central importance to this area.
	On the kind of supply-side policies needed, again, I suspect that there is a wide measure of consensus in this House. I picked up on some remarks of my great and noble friend Lord Mandelson, based on his ministerial experience in the previous Government. Speaking to one of the excellent meetings of the All-Party Parliamentary Group on Rebalancing the British Economy, interestingly, he praised some of the record of Conservative Governments in the 1980s in promoting aerospace, biotech, pharma and Japanese inward investment in the car industry, which we often forget. He then talked about our increasing love affair, as a nation, with financial services. He said nothing against financial services, but noted that this love affair became a mindless infatuation, since when all we have seen are what he described as "peashooter initiatives" to deal with the need for rebalancing our economy back to production. The question is how we can transform this succession of peashooter initiatives into what the Prime Minister would doubtless describe as a big bazooka.
	There is a range of things that the Government could do, building on what the Labour Government tried to do towards the end of their term, particularly in 2010. There is the expansion of technology transfer institutions, the Hauser report, and the need to improve our record in Britain in transforming our excellent, world-class research into commercially successful innovation, which we are not nearly so good at. There is a need for public intervention to provide finance for growing small and medium-sized firms. This is an imperative in today's environment, in which the banking system is not able to fulfil its proper function: we need a British investment bank. We need a proper infrastructure plan. The Government have made nods in this direction, but they are having difficulty in mobilising the pension funds and private finance that they had hoped for. The truth is that, unless the Government offer guarantees that limit the risks for such investors, we are not likely to get private money into public infrastructure in a big way.
	We need to do more on skills. We know that employers, of their own initiative, will not raise skill levels: there is a market failure here. The Government are trying to expand apprenticeships, but their record is very mixed and there is great debate about whether the expansion is a genuine expansion of real apprenticeships that lead to opportunities for technician training going right up the skill ladder. That is what we need and I wonder whether we are getting it. We need action to improve the quality of management. Here is a tremendous role for the post-1992 universities-of one of which, the University of Cumbria, I am director. We need the universities to engage with businesses in raising the quality of management and their workforces. We need to build on our public strengths, which have important competition advantages and where the public role is absolutely crucial, such as the universities in attracting students from overseas, our medicine and our culture.
	I am not arguing for big government in order to address these questions, but you must have active government. You particularly have to have an active Government with a strategic sense of how they will develop the sectors where we have the best chance of being competitive. This is particularly important in public procurement. You cannot just have centralised government. You must have effective machinery for action at regional and local level. This is where the decision to abolish the regional development agencies was destructive. In my own area, Cumbria, there is now no effective machinery for promoting regional economic development.
	I, for one, look forward to the review of the noble Lord, Lord Heseltine, of the growth agenda. At the moment, for all the talk, I see little sign of the Government upgrading their efforts beyond what my noble friend Lord Mandelson described as these "pea-shooter initiatives". Indeed, to make a slightly political point, I am bemused about the debate in the other place on growth, which all seems to be about deregulation and tax cuts. No one wants regulation for its own sake. No one believes in taxes for their own sake. But the problems of the British economy do not lie in a lack of flexibility in the labour markets, or in taxation being too high. We have a more flexible labour market, in many respects, than the United States. I find all this talk about Beecroft report totally bemusing. It is a sub-Thatcherite agenda of deregulation, which is the wrong strategy for the British economy. We have to compete on the basis of skill. We cannot compete on the basis of deregulation. We need a national consensus on the kind of industrial policy we are going to need. It is depressing that we are still a long way from that.
	I have just a few remarks to make on the exchange rate and Europe. On the exchange rate, the Government should be thinking about why the devaluation that we saw in 2008 has done so little to improve our trade balance and industrial performance. What conclusions do we draw from this? One conclusion is that the exchange rate does not matter very much in the modern world, with the integration of global supply chains and all the rest. That would be an error. One of the mistakes that we made over the past 20 years was treating the exchange rate as a residual. The exchange rate went up a great deal at the end of the 1990s. The pressure of a high exchange rate was one of the reasons why our manufacturing had problems over the past decade. Although this was good for productivity-the productivity numbers went up a lot-it squeezed the size of the sector more than it should have been squeezed. So the post-1992 framework of our economic policy will have to be rethought anyway in the light of the crisis. We should be thinking about whether we can give a more central role to exchange rate stability in the management of the economy, and how we would go about that. Are the Government thinking on these lines?
	On Europe, all this chatter about an in/out referendum might well have serious economic consequences, which no one seems to take into account in the rather heated political debate. How would British business feel, including the people who have invested in Britain, if we were no longer part of the EU, or if we remained in the European Economic Area with no say in shaping the rules of EU governance? Do we seriously think that if there was a prospect of Britain coming out of an active and central role in the European Union that inward investors would continue to look at investment in the UK?

Lord De Mauley: My Lords-

Lord Liddle: I have 12 minutes.
	I am not trying to make a political point. However, the question of Britain's role in Europe cannot be decided on the basis of party-political positioning, or of populism and ignorance. We need business to take an active role in this debate. What I would like to hear from the Government is what they are doing to consult business about its view about Britain's role in the European Union in future, and what the real costs of playing around with our economic future might be. This raises very serious issues for the future of growth and jobs in Britain.

Baroness Nicholson of Winterbourne: My Lords, the noble Lord, Lord Liddle, in his wide-ranging remarks, commented that he wished the Government could be more active. In my support for the splendid Motion put forward by the noble Lord, Lord Jenkin of Roding, on which I warmly congratulate him, I am not seeking for the Government to be more active, because most businesses would request that government stand back. I am putting forward comments which I hope the Minister will take into full account and maybe even action some of them. I hope this will strengthen the Government's position in supporting British industry internationally.
	It is an absolute fact that, given that the House of Commons is omnipotent and omnicompetent, the international competitiveness of UK industry abroad is in some way restricted by our own democratic system. It places us at a disadvantage with our competitors, for example. Today, we must be looking at the competition while praising industry. We are trying to see who we are up against, and how we can do better than the competition. Our particular democratic political system inevitably pins the Prime Minister, the Deputy Prime Minister and other Ministers to the Benches; as does the system here, with our parliamentary Questions, constant debates and Statements. The democratic accountability of Ministers means that they must very often be here. Inevitably that can be seen to place UK businesses at a disadvantage with nations such as France, which is regularly led by prime ministerial and presidential delegations all over the globe. I know that the coalition Government are working to improve this. However, it is a simple fact that our system, in that sense, cannot provide that same spear-headed support that some other member states of the European Union and the USA can do. Therefore, I suggest that it is even more crucial that the UK Government provide a coherent and cohesive service to UK industry, particularly in-country. The steps this Government have already taken to raise British trade and investment interest abroad, which give a new and highly welcome pre-eminence to commercial diplomacy, are excellent; but there are significant concerns and gaps that still remain. I will be highlighting some of the most serious concerns, and inviting the Government rigorously to address them.
	For a Government who have made significant and considerable progress with their welcome stress on value for money, results, outcomes and impact, it is noticeable that such language and structures are not readily mentioned in the Government's commercial diplomacy, such as in the FCO's charter for business. I wonder whether that might be considered when the new edition, which I am sure is on the way, emerges.
	The House of Commons business committee, for example, has previously reported that UK embassy and UKTI staff do not readily identify whether the country in which they are serving is a priority country and what the difference means. That is not helped, in my view, by the lack of transparency and accountability in the process for deciding priority countries or in how and where ministerial-led trade missions are sent. For example, the various sector and advisory groups supported by UKTI are appointed directly by Ministers without any parliamentary scrutiny. That provides a democratic deficit in what are essentially government and thus taxpayer-funded bodies influencing UK policy. It also causes potential conflicts of interest and a lack of trust in the capabilities of those bodies. Perhaps the Minister would be willing to reconsider that point.
	I have previously asked a Written Question to this effect and received a somewhat summary rejection by the Government, but I believe it would be more than helpful to shine a light on the practices of the Government in supporting UK industry abroad, perhaps by introducing an independent evaluation body. That could be similar in make-up to the Independent Commission for Aid Impact, specifically for trade impact or at least to offer in some way a more formal, thorough and transparent process than the current largely questionnaire-based process. This revamped evaluation mechanism and transparency would much more effectively highlight results, provided those results have been identified and the objectives achieved; and thus our knowledge, value for money and serious impact, on which the Government, in all other sectors, are so keen, would become available. I think that would immensely heighten the Government's capability in supporting industry.
	I turn to priority countries. UKTI has a series of priority countries and UK Export Finance-the old ECGD-focuses on certain countries, not necessarily the same ones, depending on UK Export Finance's own criteria of how effective and able it will be to receive its funding back in the long term. The FCO has its own geopolitical and strategic priorities which do not reflect consistently UKTI's priorities. Again, DfID has its own 28 priority countries and works in many more. Is it not unsurprising that with this array of different prioritisations the UK struggles-and I believe that it fails-to put forward a single face, in country and internationally.
	Have the Government thought how to co-ordinate these different priority countries and even priority sectors within those countries? A possible example of how the UK does not enable itself to bring its full impact to bear in a country would be the disconnect between UKTI and DfID priority countries. As the Government are already providing significant expenditure to DfID's priority countries, as well as to the other countries in which DfID works, would it not make sense for UK Export Finance to provide preferential export credits to those countries to ensure that the UK is gaining the fullest possible impact and value for money for its investments in its stated priority countries? Are we not now aware that the long-term effectiveness for what is called development aid is, in fact, through the development of business and industry on the ground? That is surely one of the key reasons why, quite properly, this Government, as opposed to the previous Government, have placed commercial diplomacy and the strength of British business and industry at the absolute heart of their overall international policy.
	With that in mind, I turn to the knotty problem of UKBA, the UK Border Agency. I declare here that I am honorary chairman of the Iraq Britain Business Council, which is working not just in Iraq but in other countries in the Middle East and North Africa region. In that role, I have the privilege to work with some of Britain's most competitive and powerful companies in the oil and gas, construction and infrastructure, finance and professional services, education and training, telecommunications, and other sectors.
	My remarks do not necessarily reflect the views of any of those companies. Nor have I put these comments in front of any of those companies to gain their agreement or otherwise. These are my own comments. Iraq is one of the great potential sources of trade and development-for international companies as well as the UK's-which is relatively untapped, and as chairman of the Iraq-British Business Council, I foresee the difficulties that our companies face.
	Given our historic legacy and our strong presence in the region of the Middle East and North Africa, UK companies and UK-based companies, or those trading through the United Kingdom-particularly those using the English language, which is now the business language of the globe-are relatively well represented in Iraq. However, there are key issues which diminish UK competitiveness towards both western and eastern countries. I have mentioned several.
	The policies and priorities of UKBA for countries and for sectors of populations do not match up with any other British Government policy. It is almost impossible to get UK visas, not only for Iraqi business men and women, but for other nations with which I work in the region. It is difficult, onerous and, I would suggest, humiliating. I take the case in front of me at the moment of an outstandingly large company in the region: one of the main board directors wants to come here for business, and to bring his wife and a couple of children with him. It is Ramadan soon, and it is a good time for him to come as there is space at home and less work going on. Is it really essential for him to wait 15 days at least, maybe 20 or more, in Lebanon, for a visa? Is this a way in which British industry can be helped? Is this the way for us to make friends and influence people, or in the modern phraseology, win hearts and minds, as well as win business?
	Of course, it makes the training of staff from host countries, at all levels in the UK, almost an impossible matter. Business meetings in the UK are extremely difficult to set up because of this. I would suggest that UKBA must be brought into the fold of the wider umbrella of the heartland of British policy internationally. I do not yet see that happening.
	British business is repeatedly urged by the British Government to invest. In Iraq, the Iraqi Government are also urging us to invest. The Government of Basra delivered this message in a BBC Radio 4 programme. Prime Minister Maliki and President Barzani both say that the door is wide open for Britain. I believe that the British Government are inadvertently not pulling their weight in this overridingly important matter. I urge the Minister to take note of the points that I have made, and perhaps to carry them out.

Lord Kakkar: My Lords, I, too, congratulate the noble Lord, Lord Jenkin of Roding, on having secured this important debate. I would like to focus my comments on something that he said in his introductory remarks around the issue of the life sciences industry. In doing so, I remind noble Lords of my entry in the register of interests as professor of surgery at University College London; as chair of quality at University College London Partners, one of the five designated academic health science centres in our country; and of my collaborative activities with the life sciences industry, focused on the area of thrombosis research, my own particular science interest.
	The life sciences industry-pharmaceuticals, medical technology and medical and industrial biotechnology-is described as being exceedingly important to our country, and second only to financial services in the contribution that it makes to our economy. The industry generates in excess of £50 billion a year in revenue and employs some 166,000 people. In the pharmaceutical industry, the export of medicines in 2009 generated £7 billion in excess revenues compared to our importation of medicines. Over the past 30 years the pharmaceutical industry, through sales of medicines and medicinal products, has been a net contributor to our economy.
	The pharmaceutical industry employs some 72,000 of our fellow citizens in this country. The medical technology industry has a turnover of some £15 billion a year and employs in excess of 60,000 of our fellow citizens. As to the value of public expenditure in medical research, every pound spent brings a contribution of 39p in extra economic activity in perpetuity. To a simple surgeon that suggests that when we invest in biomedical research we get a 39% return on our investment for ever-which is very impressive. Conversely, it is also well noted that if we were to remove from research council funding £1 billion of annual investment in the sciences and medical research, we would lose some £10 billion of gross domestic product. It is hugely important that public investment should continue to drive this important area of economic activity.
	On the broader contributions beyond public expenditure, one-third of all the investment in biomedical research comes from charities. That is really quite impressive. Some 40% of investment in research and development in this area of activity comes from foreign multinational companies. Of all the G8 countries, we receive the largest proportion of investment in our R and D from foreign multinationals, which is tremendously impressive. It is something on which we should focus and that we should bring to the heart of any policy-making.
	The Government are to be congratulated on having recognised this and on having made this a particular area of focus and attention over the past two years, not only because there is huge opportunity for economic growth and development associated with investment in the life sciences industry, but because investing in this area has the important benefit of improving our ability to deliver healthcare, improving the technologies and innovations that we can provide to patients and our fellow citizens and therefore improving clinical outcomes. It is striking to see how contributions from research in the United Kingdom play across the world. Our population represents less than 1% of the global population, but 12% of all citations in biomedical sciences around the world are citations of research undertaken in our country. This demonstrates that our impact across the world remains hugely important.
	The noble Lord, Lord Jenkin of Roding, mentioned the life sciences strategy that was announced by the Prime Minister on 5 December 2011. It is an important strategy that has the capacity to do a huge amount to drive forward the development of the life sciences industry in our country and also to ensure that biomedical research in the academic arena, in our universities and in the NHS, continues to grow and prosper for the benefit of patients.
	A number of important initiatives are described in the life sciences strategy, one of the most interesting of which is the commitment to the development of telemedicine to ensure that we can better manage patients with chronic diseases in their own homes, along with a commitment to ensure that 3 million patients with chronic diseases will be provided with the opportunity to access telemedicine so that their condition can be monitored at home rather than needing to avail hospital facilities for the management of their care. There is also the commitment to a £180-million catalyst fund to help identify and provide early investment into the potential breakthroughs of the future, those that will have the greatest clinical impact and thus encourage investment into our country.
	We also have what at the time was a somewhat controversial commitment to ensure that across the National Health Service as a whole, the great store of data on clinical conditions that we hold is better aligned to research opportunities and therefore able to attract greater investment into the health service for research. There is, too, the important commitment to ensure early access into the NHS and therefore early access for patients to innovations and new drugs. This will be particularly attractive to the biopharmaceutical industry in terms of ensuring that it targets its research activities in the United Kingdom because it will be better able to access rapidly the potential markets for its innovations.
	In addition to the life sciences strategy, we recently saw the publication of the innovation review by the chief executive of the NHS which looks specifically at how the health service can better adopt innovation, diffuse it widely across the entire NHS and, what is particularly important, ensure that the health service is outward-looking in terms of its relationship with the life sciences industry so that in addition to achieving its primary objective of providing the best healthcare for the people of our country, it is able to contribute to the broader generation of wealth creation, thus promoting the interests of UK plc, as the chief executive puts it in this document.
	However, there are also some problems. Although investment in our life sciences industry by foreign multinational companies remains substantial, over the past 10 to 12 years there has been a considerable reduction in the contribution we make to global clinical trials, the important phase 2 and phase 3 research studies that allow us to evaluate novel interventions and new drug therapies. Before the introduction of the European clinical trials directive in 2003, some 6% of all patients going into clinical research globally came from our country. By 2006 the percentage had fallen to just 2%, and by 2010 to 1.4%. That is a very worrying trend. The European Commission has recognised that this is a problem not only for our own country but throughout Europe, and is now looking at how the directive might be revised. What position have Her Majesty's Government taken in these negotiations, in particular to ensure that, when the directive is re-presented, it is much more flexible in allowing for recognition of the national standards that apply to clinical research, which are particularly high in our country, and that any competitive edge which had inadvertently been lost in the past can be regained once again?
	Some 23% of those who work in the sciences and biomedical sciences departments in our academic institutions come from outside the United Kingdom. One of the great concerns is the potential impact of the changes made to visa requirements on the ability to attract top-rate clinical and basic scientists to come and work in our country. Is the Minister able to confirm that Her Majesty's Government remain sympathetic to the need to attract top basic and clinical scientists so as to ensure that our life sciences, and particularly our academic research institutions, are able to compete at the highest levels globally?
	Finally, there is the broader question of how we can build on the initiatives of Her Majesty's Government to drive forward the life sciences industry. There is concern that the generous settlements which have been provided in the current spending round for the research councils and for medical research in particular may not be sustainable in the next spending round. However, it is vitally important that they are maintained. As I have said, investment in medical research provides remarkable long-term returns to the wider economy. Is the Minister able to confirm that Her Majesty's Government remain sympathetic to investment in research and innovation?
	There is also a need to look at tax incentives to better ensure that this country encourages venture capital investment at the very early stage in translational medical research. We need to develop a system of adaptive licensing, combined with the advances we are going to see in genomic medicine and stratified medicine, to ensure that new innovations can come to the market quickly and benefit patients. We also need to look at the way that the National Institute for Clinical Excellence judges value in terms of innovation, looking not only at the quality of life improvement but also at the economic and broader social impact of innovation.
	Finally, there must always be a careful, measured approach towards regulation of research, ensuring that patients are always protected but also that the environment for research in our country remains competitive and attractive.

Lord Brooke of Sutton Mandeville: My Lords, it is a privilege to follow the noble Lord, Lord Kakkar, a professor who brings great professional distinction to your Lordships' House and conspicuous relevance to this debate. I declare an interest as president of the British Art Market Federation, though I am not going to allude to that international market in my speech.
	My noble friend Lord Jenkin of Roding, with whom I have made common cause from time to time on behalf of the City of London, deserves all the conventional plaudits for securing this debate and for opening it so characteristically comprehensively. He deserves unconventional ones too for the letter with which he summoned some of us to his cause. It was a model of its kind and spellbinding in its irresistibility, just as he has today added yet another string to his bow and to a repertoire which embraces expert knowledge of the sciences, especially in the energy field, of local government and of what our forebears would have called political economy. He has, moreover, in the first week of July, given us a whiff of the sense of holiday-even of romance-that lies ahead of us at the end of this month when the long Recess beckons.
	Trade has its own mystical aromas. This year is the bicentenary of Burckhardt's rediscovery, after six centuries, of Petra:
	"A rose-red city-'half as old as time'",
	standing at the great Nabatean crossroads of two major trade routes amid the mountains in the Jordanian desert. Across the centuries, those spices of Araby and silks of the East mingle with John Masefield's:
	"Dirty British coaster with a salt-caked smoke stack,
	Butting through the Channel in the mad March days,With a cargo of Tyne coal, Road-rails, pig-lead,Firewood, iron-ware and cheap tin trays".
	Heady though those romantic scents are, there is a different sense in which they are profoundly serious, for unless we can steer our national barque-a Scrabble word I spell for the Hansard writers with a "q" and a "u"-we are not going to evade or escape the slough of despond which is the world's current economic and financial lot. In the challenging agenda of today's debate lie the real prospects of recovery from an otherwise intractable fate. In the middle of page 5 of your Lordships' Library's admirable note prepared for this debate, there are parentheses from the Office for Budget Responsibility containing the magical words "excluding oils and erratics". As an undergraduate, I played village cricket for my college in a side called the Erratics, which catches the double sidedness of joy and duty of this voyage. Until today, I had not appreciated that we had then been in philological descent from a trade category.
	Since the nature of our predicament makes starting blocks difficult to discern, let me pick out some encouraging-if random-travel brochures. First is the coincidence that in the European Union-which is at this time, saving the grace of many, one or our beds of nails-the complement of overall unemployed is 23 million which, give or take the population of a medium-sized city, exactly coincides with the number of SMEs the Union contains, so that one extra employee in each SME would solve the conundrum of unemployment. It is, of course, a fantasy worthy of the Odyssey because the precise distribution of the unemployed and the national SMEs are not so perfectly aligned, but I cannot conceive of any time in my 18-year private sector career of continuous profit accountability when I could not have constructively added at least one single person to every unit in our business, so it does carry seeds of hope. Moreover, it underlines the virtue of the EU in seeking specially to reduce regulations in units employing fewer than 10 people.
	Secondly, the very initials "SME" bring the medium-sized businesses into focus. The lure of the small business as the key to employment growth has been around since Shell promulgated it a third of a century ago, but its now conventional centrality may have taken our eye off the medium-sized ball which, in engineering for instance, provides growth points of great promise. Next, the World Economic Forum's league tables of international competitiveness show us beginning-even if only patchily-to pick ourselves up off the floor, though I shall return later to one paradox of institutional verdicts which needs attention. Next, it is a truism of success in the world of tourism that a good holiday is made up of dozens of component elements but if one or two go wrong they sully the total recollection. I am struck, in the run-up to this summer's Games, by how the Olympic totems Wenlock and Mandeville-I take personal pride in the exploits of the latter-have been both imaginative and comprehensive in their management of detail, which is a good augury to be cherished.
	Finally, I have sat at the feet of my noble friend Lord Green on the subject of Africa since he took on his present portfolio. We know from the Latin of Pliny the Elder that there is always something new coming out of Africa. I shall be interested in my noble friend's view on whether he feels Africa collectively is one of the next mega-BRICs-though perhaps one should say mega-BRICAs.
	I move from travel brochures to headlines. Despite the contemporary aridity of EU prospects, I find profoundly encouraging the twin facts that, though our manufacturing base has latterly shrunk by almost 50%, our exports of manufactured goods outside the EU have grown by nearly 25% since 2010. That is not merely evidence of a main chance but also of it being seized. Secondly, the virtue that the Library briefing has drawn on so many sources brings home a much greater intellectual coherence to our global trade planning than I would have appreciated prior to preparing for this debate. I find wholly convincing the argument in the research report entitled "Understanding Recent Developments in UK External Trade" in the Bank of England Quarterly Bulletin in the fourth quarter of last year because services exports are less sensitive to movements in the exchange rate, even when I am also aware of how much of our growth in services has been due to the expansion of professional services as against purely financial ones. Trust in us in this area remains globally high.
	I am not going to get into the vicissitudes of foreign direct investment-though I realise how we have been currently losing out to the Germans from the Chinese-save to commend the House of Commons Library for its regularly updated Standard Note 1828 on this subject, and to emphasise how much we gain indirectly through technology transfer and management techniques from inward direct investment. Ministers have recently used the car industry as an example. When I started out in business 50 or so years ago, there were already 1,600 American subsidiaries here and it was very noticeable, in sectors like pharmaceuticals, advertising and branded consumer goods, that American participation raised competitiveness to an extent that indigenously there was a substantial economic return in moving suitably flexible British managers from competitive sectors into ones that were notably uncompetitive.
	My noble friend responding to the debate will have more than enough to answer when he winds up so, before adding to his agenda, let me utter words of praise. I am profoundly impressed by the way that the Foreign Office under Mr Hague's leadership is expanding its global commercial and diplomatic coverage, even in these hard times, by reopening embassies and in expanding the consular network, just as my noble and learned friend Lord Howe of Aberavon urged in opposition.
	I am full of praise for the growing imaginativeness of UK export finance, as well as that which is helping to secure office space for new UK exporters in effervescent markets. I am delighted by the application of the theory of comparative advantage to the Darwinian evolution of successful exporters through sensitive and sophisticated product choice, especially in emerging markets. However, I have some bits of grit in my shoe, on which I should be happy for the Minister to reply later than today.
	The Government have made announcements on enterprise zones, both in the Plan for Growth and the Treasury Press Notice entitled Autumn Statement: Growth of 29 November last year, covering the second phase of the Government's growth review. However, there are some notable mismatches in the details between the two references. A composite progress report on each of the original choices of zones might be productive.
	I return to an earlier comment. The OECD said in its UK economic survey of March 2011 that faster-rising labour costs in UK manufacturing had robbed us of some of the benefit of a 20% appreciation of sterling, whereas the IMF in May 2012 said:
	"Encouragingly, labor market performance has been better, with falling unemployment in recent months and fewer employment losses than in the aftermath of previous major UK recessions".
	I realise that there is at least a year between those two comments and that the Government are responsible for neither, but a reconciliation of the paradox would be interesting.
	Finally, I hope that the Chancellor's confession in March 2011 that our tax code had become so complex that it recently overtook India's to become the longest in the world is not the last word on the subject, even while allowing for his immediate efforts at repair, for unnecessary complexity is not conducive to a good climate in which to do business.
	More generally, I hope that we can recover some of what Keynes called "animal spirits". Paul Claudel, the French poet who was his country's ambassador in Washington in 1929, could not have known what was in store for the world when he hosted a soirée at the embassy on the first day of the Wall Street crash, and gave a toast to the effect that:
	"Between the crisis and the catastrophe there is always time for a glass of champagne".
	However, there is one interesting echo between 1932 and 2012. In 1932, De La Rue was almost bust when a new chairman arrived and decided to take a gamble by throwing a massive dinner for the diplomatic corps, which was so effective in persuading the latter that the company's future must be secure that security printing orders poured in from across the world. The De La Rue dinner is still with us today, while Greek membership of the eurozone still hovers on the brink.
	Let me end as I began. Last month saw the centenary of the poem, "The Old Vicarage, Grantchester", by my namesake, Rupert. Given when this debate will end, if we can move the church clock from 10 to three on today's issues between now and the Summer Recess, we shall have been doing our duty and there may, indeed, be honey still for tea.

Baroness O'Cathain: My Lords, I thank my noble friend Lord Jenkin for proposing this debate. I totally support his emphasis on exports as being of fundamental importance to our future economic health. It is rather daunting to follow the exceptional, erudite, literary, humorous and informative contributions to this debate. Now is the time to run for a quick cup of coffee.
	Listening to the daily cut and thrust of Questions in this House, there is much repetition of statistics, which are not as great as one would wish. The problem, as always, is the presentation of statistics; their updating and revision deflect attention from the main picture. Serious economic conditions, of course, persist in this country and in all the countries to which we export. We have to concentrate on improving every area of our activity, leading to advances in all sectors involved in exports.
	Less than two weeks ago, I took part in a discussion in Ireland with some 25 businessmen about future developments in the Irish economy and the economy of the whole EU. It was a good experience. We all know the sad saga of the monumental boom and bust that left Ireland as the first bailout candidate. Some time ago, the economic situation in that country was described to me as, "the greatest party of all time in the 1990s and the noughties, which led to the biggest hangover of all time".
	The Irish have woken up and taken the medicine, and although they are not yet out of the wood they are well on the way back. Even today, I am told, there was an auction of three-month Treasury bills for the first time since September 2010. The Irish realisation is that they have to work exceptionally hard, search the world for opportunities for export, get their financial house in order and talk the country up. For "Ireland", say "Britain. Above all, the realisation is that we have to work exceptionally hard, search the world for opportunities for export, get our financial house in order and talk the UK up.
	As my noble friend Lord Jenkin has said, we do not give our manufacturing industry enough credit. There are so many moaners and bleaters around that we are actually beginning to think that we are not good at very much. Recently, I was discussing with a friend the subject of UK trading relationships, and it was explained to me that as a trading nation we trade in three distinct groups: the allies, the US; our friends, the EU-not that the allies are not our friends; and our family, the Commonwealth. The message that I took from this is that we need to focus more strategically, not just adopt the line that everything that we produce we can export, market and sell anywhere, or that the methods of developing long-term trading relationships are ubiquitous.
	Many of our businesses do not truly take on board that there are developing stars out there. We have been reminded of that today. The analogy with the celestial is not as crackpot as one might think. Through astronomy we are constantly learning about new planets and new stars. There are fascinating revelations that are a long way removed from the situation in my child childhood when only eight planets were marked on our celestial globe. Taking us back to earth, yes there are more and more stars in terms of developing countries with growth rates that we can only dream about and where markets are opening up monthly. Many of these are in our own family: namely, the Commonwealth.
	I do not want to put the Minister on the spot but I wonder whether he could or would be prepared to arrange a session where we can be enlightened further about the huge potential in the Commonwealth and suggest ways in which parliamentarians might be able to focus on this, rather than bleating about the awful situation that we are in. Yes, sections of world trading are suffering, including, to name but two, the eurozone and banking. However, I remind noble Lords of Oscar Wilde's great saying:
	"We are all in the gutter but some of us are looking at the stars".
	We must look forward, onwards and upwards, building on our undoubted skills, highly developed inbuilt initiative, educated workforce, record of success in many areas, not least in high-tech state of the art engineering, in world-class pharmaceuticals, in food processing, in design skills and, yes, in manufacturing. The motor industry, as I have said previously in the House, is in a better state than it has been for the past 15 years. The noble Lord, Lord Kakkar, has given us a brilliant exposition of UK skills and success in the life sciences industry. Our heads must be kept high. Our rating agency status is, after all, triple A. Remember that France and Italy have been downgraded.
	Encouragement should be the buzzword, not dismay. It is particularly important to encourage the young-this has already been alluded to-to ignore despondency and to renew enthusiasm for the UK and its prospects. The UK accounts for about 1% of the world's population, and we certainly punch above our weight even now. The EU accounts for about 8% of the world's population, but the Commonwealth accounts for some 30%. What an opportunity.
	The Commonwealth contains at least seven of the fastest growing highest-tech and richest world economies: India, Canada, Australia, Malaysia, South Africa, Nigeria and Singapore; and several more fast growers are coming up alongside-Mozambique, Tanzania, Ghana and Bangladesh. All are growing consumer markets with demands for our products and sources of wealth for investment here in this country. The OECD estimates that over the next 20 years almost all the growth in world trade will lie outside Europe. We have to renew our efforts now, focus on policy measures-the noble Lord, Lord Liddle, made this point-and look outside Europe to ensure that we will be ready, willing and very able to participate in the growth and in helping in other ways. We can export items such as education-in training and in our wonderful technical skills, mentioned so ably by the noble Lord, Lord Kakkar.
	I am not for one moment suggesting that we should ignore our friends in Europe. From time to time some of us get exasperated with overregulation and snail-pace action to remove the barriers to completing the single market. The EU is and will remain important to us, as the noble Lord, Lord Liddle, has explained. He also made a valid point about recognising serious repercussions if we unilaterally decided to leave the EU. It is important that both sides of this argument are analysed and that all the likely repercussions are aired and understood. The EU market is still the largest single market in the world and over half our exports end up there. One in 10 jobs in the UK depends on trade with the EU, which is equivalent to 3.5 million jobs.
	One of the other things I learnt recently is that half of all European business headquarters are based in the UK. All this is proof positive that the EU is important. We just must work harder at it. My noble friend Lord Jenkin gave us a magnificent and specific tour d'horizon and encouraged us all. Now all of us must act.

Lord Haskel: My Lords, I start with a confession. I have a problem with the concept of international competitiveness. The factors affecting a nation's competitiveness are different from those affecting the competitiveness of, say, a business sector. For instance, my country's life sciences can be better than your country's life sciences, as the noble Lord, Lord Kakkar, explained. The competitiveness of individual businesses is much more obvious-"My cars are better than your cars". So I am grateful to the noble Lord, Lord Jenkin, for this debate about international competitiveness, but while international comparisons may be important to economists, politicians and bond salesmen, to most of us the competitiveness of our place of work is what is important. This is because competitiveness means productivity. That is where we earn our living, as the noble Lord, Lord Jenkin, pointed out; the two go hand in hand.
	In 2003, the then Labour Government asked Professor Porter and others to say how we could become more competitive by raising our productivity. Their response was practical and direct: improve and modernise skills and skills training; stimulate innovation through science and product development; supplement manufacturing with services; encourage a faster take-up of new technologies in the public and the private sector, much of this done through clusters; and encourage people to win the race to the top, not enter the race to the bottom. In the five years up to the financial crash, these principles worked pretty well. Our productivity or competitiveness improved by 2% or 3% a year. Many of the policies of the coalition Government still reinforce and bring up to date these principles. I think they still remain true. Yet since the financial crash our productivity or competitiveness has hardly moved. If anything it has gone down. Can we find the answer in the international competitiveness league table? The noble Lord, Lord Brooke, mentioned the World Economic Forum's global competitiveness index. This year we rank 10th, and two years ago we were 12th. This index is based on 12 pillars that provide a checklist of factors affecting our competitiveness. Some are relevant, others less so, and some are completely absent. On some of them we do very well. We have some strong institutions; we have a respect for law and an honest and uncorrupted public service. In health and higher education we perform pretty well. We have an effective, efficient and competitive market of a size which allows us to be productive. We also have a market which is conducive to innovation. Thanks to our science base, research organisations and organisations such as the Technology Strategy Board and our fascination with digitalisation we have recently developed a large number of clever, lively, innovative and enterprising companies that specialise in selling their products, ideas and services into what at first seem special markets. However, these markets often turn out to be large because we live in an era of global markets. This is the innovation and marketing that the noble Lord, Lord Jenkin, and the noble Lord, Lord Kakkar, spoke about. The Minister works hard at this and I join other noble Lords in giving him our thanks.
	In other areas, we do less well. The noble Lord, Lord Liddle, pointed out that our infrastructure lets us down. The World Economic Forum ranks us 28th for infrastructure, just behind Malaysia. I agree with the noble Lord: our skills training has not kept up with demand, nor has it moved with the time-and, yes, this includes management. The conflict between the longer-term needs of industry and the short-term outlook of our financial sector is legendary. The financial sector may be competitive in its own terms, but in terms of UK competitiveness as a whole it could be a distinct disadvantage. No pillar includes intangible investment. In Britain this is certainly now equal to tangible investment and crucial to our competitiveness because of the nature of the businesses which are growing in this country. I am sure that the Minister of all people would agree that money spent on branding or market development is an important investment. All this illustrates the problem I have with international competitiveness.
	However, economic data are not everything. It is always a mistake to separate the economics of business and industry from the needs of society. A fair society and a strong economy go together. This is why both social and economic considerations have to be taken into account when judging our nation's competitiveness. The noble Lord, Lord Jenkin, spoke about inward investment. The noble Lord, Lord Kakkar, pointed out that this means people coming here, as well as money. All of us get the feeling that we are less welcoming to foreigners than we used to be. We have benefited greatly from them in the past-are we having second thoughts? I think we are, and this will not help our competitiveness, nor our productivity. Ministers talk about having competitive regulation. This usually means less, but we are slowly learning that we need better regulation not just less, and we need to explain why it is required. Sadly, we are learning the hard way about regulating the banking industry. Our competitiveness does not increase as we reduce regulation. No, our competitiveness goes up as we introduce better regulation. It will be regulation which is enforced. It will be light regulation which encourages a feeling of freedom but not a feeling of impunity. It will be regulation which properly deals with market failure. In sectors such as the environmental industry, good regulation actually stimulates the innovation and investment, which adds to our competitiveness.
	Working conditions, too, have become a factor in competitiveness. Social considerations mean that cheap, sweat-shop clothing has not been competitive for some years. The competitiveness of our tax regime has become a social consideration, too. Yes, the generous arrangements whereby companies and individuals can reduce their tax bills may have been a competitive advantage at one time but, now that it is all out in the open, this will change. Social considerations of fairness have to be taken into account in the competitiveness of our tax regime.
	We certainly need a policy boost. At national level, we can encourage the national stewardship code for our enterprises, as the noble Baroness, Lady O'Cathain, implied. We must develop a national long-term vision as to where our economy is going, and we must certainly continue with the productivity work of the 2003 paper. This has served us well.
	At a more local level, we must concentrate on raising our performance, our presence and our productivity in those sectors where we are strong. The noble Lord, Lord Liddle, explained why. It will inspire people to make where they live and where they work more competitive. At the same time, we must work towards a more equal society, because all these efforts are much more likely to flourish and succeed in an equal society than in a divided society.

Lord Flight: My Lords, I congratulate the noble Lord, Lord Jenkin, on introducing this debate and on raising a mixture of extremely important issues. I am particularly pleased that the noble Lord, Lord Green, will respond and I look forward to hearing what he has to say on the excellent work that he has been doing globetrotting and promoting Britain. His was a very important appointment by the coalition Government.
	My interests are those declared in the register. Some of those companies are significant exporters of services. To me, services and manufactured goods are all the same pot. Quite where the division lies, I am not quite sure. Is software a manufactured item or a service?
	It is clear that we are doing okay and have more to offer in the life sciences-as the noble Lord, Lord Kakkar, pointed out-in the software industries, in business services, in quality goods and services, and in education both in this country and about the world.
	We have not done too badly in continuing to attract inward investment. It is particularly interesting that we are one of the most successful car manufacturers in the EU-I believe that car exports have risen to their highest ever level quite recently. We can make good cars here at competitive prices if the management is up to managing it properly.
	It is true that sterling was overvalued for too long and that devaluation has made it more competitive, but it has arguably not made it competitive enough. Unlike Germany, I think that, broadly, the exchange rate should be used to adjust for differences in competitiveness rather to than to put countries through the agony of internal devaluations that wreck their economies.
	The noble Lord, Lord Jenkin, mentioned one of the Bank of England's usual understatements. To me, the economic facts of life are very simple: if this economy is going to pick up and grow, it can do it only through rising exports and capital investment. There is little or no scope for growth to continue to come from rising consumption. We had nearly 20 years of living above our means and of growth based on rising consumption and financed by debt and selling the family silver. We had a massive cumulative balance of payments deficit-to use old-fashioned language. That has come to an end. If we are going to grow, we have to export more. No range of government measures will achieve higher growth unless they achieve higher exports. While I remain a strong supporter of the Anglo-Saxon model, its one weakness is that it leads to the savings rate being far too low, with investment being far too low as a result. It is clear that Germany's success, apart from its organisational brilliance, has been the amount of its capital investment in modern industry.
	However, there is huge opportunity, as I and others have variously described it. The fast-growing economies, the BRICs, are the ones that have the potential to import more. As others have mentioned, we have the blessing of our own particular club in the form of the Commonwealth, which is now, collectively, a fast-growing part of the world and one that has language, culture and businesses practices in common with us. In my experience, it is only too happy to do business with us as far as there is scope. It has been a mistake to concentrate on the EU as our main export market. Our exports to the EU are shrinking as a percentage of our overall exports and, sadly, it is clear that EU is going to be a very flat, depressed economic area for several years to come as it sorts out the currency problem one way or the other. It is crucial, therefore, that we go for the new economies.
	I met an individual who runs the Azerbaijan society in the UK. He mentioned that it was unfortunate that Germany had sent its President there but that we had not sent anyone. I needless to say wrote to the noble Lord, Lord Green. Even in Azerbaijan, there is considerable scope to add to our involvement in the oil industry. There is also interest in our education institutions and in our quality goods. What Azerbaijan really wants is a lift in its relationships with the UK.
	I shall focus briefly on what I will call our quality goods and services. I am very interested to see that Hamleys is going to go international. It is a fantastic brand name; it is the best toy shop in the country. There are masses of scope for internationalising that. Even Fortnum and Mason is going to do the same thing. I sat back and thought, "Well, Burberry started it. Think of all the fantastic British brands for which there is much greater potential now that there are parts of the world that can afford these things, potentially more than we can ourselves".
	I broadly praise the Government's efforts. I was very pleased that the Prime Minister shot off to India. India is my pet project. The scope to export to it and to do a great deal more business with it is huge. India, as the Prime Minister of India keeps saying whenever he comes back to Cambridge, would like a special relationship with this country. Well, I would like a special relationship with India.
	However you call it, "City" is now a bad word-even worse than "politicians". I use the phrase "business services". Our overall business service exports run at £60 billion to £70 billion a year. They are not just financial products and services; they are lawyers and consultants. There is substantial scope about the world, as the rest of the world grows faster and advances, for our business services.
	Some negative issues were raised by the noble Baroness, Lady Nicholson. The London Chamber of Commerce has raised the problems of visas and passports. I have had letters from friends in Hong Kong and Sri Lanka complaining that they now have to send their applications back to London. As a result of a rather foolish economy being made by the Foreign Office, the places where they had them processed locally are being closed down, which is causing them a nightmare-others have referred to that. We have to make it easy for businessmen around the world who want to come here to do some business to get their visas or, if they are Hong Kong passport-holders, to get their passports renewed. We simply have to sort out the ridiculous situation of the excessive queues that people have to face after landing at our airports. I am not going to cast blame, but it seems ridiculous that that should have been allowed to happen. It is depressing to note that the destinations served out of Heathrow have reduced by about 50 over the past decade. We clearly need to have the best European hub available as fast as possible. UK passenger duty is far too high. It makes it uncompetitive from a holiday perspective.
	There are issues to be addressed, but we should look to British history. We were the first great exporters. What was the East India Company about? It was about trading with the whole of Asia. What did it do? It stimulated manufacturing here. Britons went about the world when it was often highly dangerous and the ship they were on might have found itself embarking on warfare with the Portuguese, but we went about and built a commercial empire that became a physical empire. We have it in our history and in our national character to be about the world doing things. I see a lot of that now reviving. At least half of my son's generation is somewhere else in the world-maybe in Shanghai or America-busily doing things that ultimately involve British exports increasing.
	Towards that end I am very keen on the new technical colleges. A friend of mine has a business that has a unique niche in producing aircraft safety devices down in the depths of Hereford. With 95% exports, it is a hugely successful business. It has grown because Hereford has always had a good technical college and he could get the people he needed trained there in a way that was required for the business. I greatly welcome the expansion of all that.
	I congratulate the Foreign Office, as others have, on its much improved services on the ground. However, 18 months ago I went to the Expo in Shanghai. There was a fantastic Italian exhibition of goods and services. You wanted to buy the lot. And what did we have? We had some clever cut-glass work of art and no mention of our goods and services. I wrote to the Foreign Secretary William Hague after he had just arrived to say that this seemed daft and I got a letter back saying that it had won some award as a work of modern art. I thought it was a classic example of how not to be promoting this country's exports.
	We have a great history and we have great potential. We want more young people to get into their planes and to go about the world and do things. I have always thought that in today's world JCB is a wonderful model of what this country can be about successfully. Let us have many more of those.

Lord Campbell of Alloway: My Lords, I also thank my noble friend Lord Jenkin for spreading a breath of fresh air and confidence about our domestic arrangements. This debate also enables objective consideration to be given to how to resolve the eurozone crisis which inhibits growth of the economy, inward investment and exports to global markets. Last week there was a meeting at Brussels where something was proposed to be done, but it appears that nothing much was explained save in the Sunday Telegraph,where it said that the first step had been taken and there were others to be taken. It did not explain, and no one knows, the nature of these steps, how many there are or what form of delay they might put on implementation of a resolution of the crisis. No one seems to know. Indeed, on Monday the Leader of this House repeated a Statement on the EU Council but there was not a word about this. He did not know. It is impossible to consider that if he had known he would not have told the House. There is no reference to this in the Library notes and looking through the press I have found no other reference to it.
	It cannot be assumed, certainly as yet, that this crisis will be resolved, because all other means of implementation to resolve this crisis introduced in the past by the Council of Ministers have failed and created a very unfortunate position. We are in that position now; we have come to a state of affairs where we have unpredictable improbables. All that can be done is for the Council of Ministers to take emergency action immediately and not leave things lying in the hope that something will happen, because nothing will happen. At the moment we are somewhat reliant on what can be done with the improbables. I shall not take much time because we cannot really resolve that. Even the Government do not seem to know what the substance of the situation is. I suggest that the Council of Ministers must negotiate and in their negotiations construct an acceptable system. And an acceptable system is not necessarily one which involves state payments to be under federalist control within the remit of the Lisbon treaty.
	What should be done in this state of affairs to which nobody else has referred but which warrants consideration? There is the idea that we shall have a new relationship treaty with the Common Market. That has been suggested by my noble friend Lord Howell of Guildford, who opposed the Lisbon treaty. He opposed it to forestall the drift towards federalisation and to produce an acceptable commercial Common Market. With that on the books, whatever the Council of Ministers does-and it must do it at once-must be temporary, emergency action. It should then be reconsidered at another conference about another system and another relationship.
	To conclude, there is also the question of the referendum. At this stage, in this situation, it is premature. It is impossible to say what there will or will not be or even to construct the words that should be used. This will be a matter for further consideration in future on the question of a new treaty. Personally, if one is allowed to say it, I am not very keen on referendums. I think it is better that the views of the people are dealt with at a general election by the parties. I hope that that will be the case.

Lord Sheikh: My Lords, I thank my noble friend Lord Jenkin for securing this important debate and congratulate him on his excellent speech. The Motion covers many areas vital to the UK economy. My contribution will focus mainly on the importance of trade.
	I have visited a number of countries in the past two years where I have been privileged to meet various senior figures from politics and business and to speak at various meetings and conferences. Engaging with our overseas partners has reasserted my long-held belief that one of the best ways that we can improve our financial position, both globally and domestically, is to place much greater emphasis on international trade.
	Our trade surplus and global market share in key industries such as aerospace and pharmaceuticals provides us with a solid base in manufacturing and research. The City of London maintains its position as the leading venue in Europe for financial services. To maintain and develop our economic promise, we must ensure that more of our goods and services are exported. I share the view held by the Chancellor that trade is vital to our economic prosperity. In addition to continuing cuts to the rate of corporation tax, the Chancellor stated that we must help British businesses to expand and innovate and that we should aim to double British exports to £1 trillion by the end of this decade. I believe that that will play an important role in helping our immediate economic recovery and ensuring that Britain remains a strong economic force for the foreseeable future.
	I strongly support the efforts of UK Trade and Investment in encouraging small and medium-sized businesses to focus on exports, with a particular emphasis on the emerging markets. It is important that we maintain our strong trade links with America and our largest trading partner, the European Union. However, it is vital that we capitalise on the growing opportunities in Brazil, Russia, India and China. Many opportunities are presented by improvement in the standard of living in countries such as India and China. Russia must not be overlooked, especially with its new-found status as a member of the World Trade Organisation. We should be increasing our exports of high-value goods and financial services to millions of potential new customers.
	The success of the so-called BRICs nations is worthy of praise, but I should like to mention the 7% club. Members of that club have achieved growth of at least 7% per annum since 1998. Research suggests that economies that achieve 7% annual growth will double in size every decade and more than quadruple in a generation. It is thought that after three decades, an economy that consistently grows at the rate of 7% per annum will be twice as large as one of achieving 5% annual growth. The 7% club includes Vietnam, Ethiopia, Uganda, Mozambique, Azerbaijan, Turkmenistan, Kazakhstan, Tajikistan, Angola, Chad, Sierra Leone, Rwanda and Cambodia.
	Last month, I led a delegation of British parliamentarians to Azerbaijan, where we met President Ilham Aliyev and leading figures in commerce. We also discussed the relationship between the United Kingdom and Azerbaijan, and stressed that the UK is very interested in expanding business links between the two countries. The Middle East is a region that also holds many opportunities for enhanced trade. I know the area well and frequently visit the Middle East countries.
	We could do more to increase trade with Commonwealth countries. Our historic connection should serve as an advantage. However, I would add that the membership of Mozambique and Rwanda speaks volumes about the influence and prestige of the Commonwealth as a unique association in welcoming countries that do not have links with the British Empire. As I mentioned earlier, those two nations also belong to the 7% club.
	What plans do Her Majesty's Government have to enhance trade with members of the 7% club? Greater co-operation among key government departments is vital to realise our potential to identify key markets and develop and promote British products overseas. That is why I wholeheartedly support the Government's effort to strengthen dialogue among the Foreign Office, the Department for Business and the Department for International Development. International trade missions have a great role to play in achieving those goals. We should organise more trade missions to overseas countries. I am pleased to say that I was recently able to assist in arranging a trade mission to a foreign country.
	We give generously to many countries through international aid, but we must consider giving more financial assistance through properly organised trade missions. Aid and trade can go hand-in-hand. Our ambassadors and high commissioners could play a more significant role in that respect.
	I have spoken about Turkey and its strategic and economic importance on a number of occasions in your Lordships' House. The Turkish economy has been growing approximately five times faster than the eurozone average. It is identified as one of the 20 high-growth priority markets in the UK Trade and Investment strategy. The UK-Turkey strategic partnership agreement has significantly helped to boost trade with this rising regional power. UK exports to Turkey in 2011 increased by 20% compared with 2010.
	On domestic affairs, I must say a few words on youth unemployment. The level of youth unemployment in Britain is one of the highest in Europe. Young people have the potential to make a vital contribution to our economy and society. It is the responsibility of those in government and commerce to work together to develop the strategy that will help our young people to weather the economic storm. I am pleased that, as from today, the Government have given powers to cities such as Leeds to regenerate their areas, which will help to create more jobs. It is important that our future economic strategy recognises the importance of small businesses, entrepreneurs and innovation to our recovery. Small and medium-sized companies play a vital role in job creation. It is therefore essential that these enterprises are not burdened by excessive bureaucracy. Cutting this and reducing the layers of bureaucracy in our public services is vital to increasing efficiency in our industries.
	I declare an interest: I am the chairman of an insurance broking and financial services organisation which also specialises in Islamic finance. I am also a vice-chairman of an associate parliamentary group on Islamic finance. We need to maintain and strengthen our role in promoting Islamic finance, which is based on mutuality, ethical behaviour, transparency and the acquisition of assets, which gives it more stability. Islamic finance is worth $1 trillion globally, and in the UK we have assets worth over $18 billion. Growth in the Islamic banking sector globally is nearly 20% per annum. In the United Kingdom we have a great deal of expertise which we can offer to the world. There are therefore opportunities for our country's involvement globally. One can argue that if financial institutions had undertaken a greater volume of Islamic products, the financial problems we are facing would probably have been less severe.
	We must of course promote our financial services industry but it is also imperative that we manufacture and export specialist products, such as precision machinery and pharmaceuticals. We have the expertise and resources to produce and export such goods. We need to have a balanced economy and encourage ideas that will further promote our manufacturing sector. I believe that we need a multifaceted approach to reviving our economic fortunes. Any overarching strategy must have a greater emphasis on international trade, which I am confident we can achieve.

Lord Bates: My Lords, it is a privilege to take part in this debate and I, too, pay tribute to my noble friend Lord Jenkin for securing it and for the compelling way in which he introduced it by making the case for Britain. In listening to the debate, not least in following my noble friend Lord Sheikh, I have been struck by the deep level of expertise that exists in this Chamber to conduct such a debate. There is wide expertise at a very high level of serving on the boards of international companies and in international trade, none more so than that of my noble friend Lord Green on the Front Bench, who will respond to this debate.
	I want to pick up on one point made by my noble friend Lord Sheikh in talking about making greater use of the resources within this House in trade missions. This is not a job application for me. I have spent most of my life in small and medium-sized enterprises, with a very strong emphasis on small, but I recognise that there are people with great expertise in this Chamber who really ought to be sent out there to bat for Britain. I am aware that there is sometimes just a little hesitation in diplomatic circles about having people who have rolled their sleeves up, and who have commercial expertise, engaging in this task.
	I recently had occasion to walk across Europe, during which time I visited some 15 different embassies and consulates. I saw the fantastic diplomatic teams who we have there and the wonderful people working for UKTI. One of the most impressive people I met was the new consul-general in Milan, Vic Annells, who is doing a tremendous job there in securing investment. He came straight out of the private sector, having worked in trade in the Middle East, and was knocking doors out of windows, as they would say in the north-east. Sometimes we look a little sneeringly on people if they do not learn the language of the country they are in and we ask, "How can they communicate?", but we have to remember that there is a universal language of business. People who are competent in that language are also required to make the case for Britain.
	I want to divide my comments into three sections: first, on the competitiveness of UK plc and its finance, with a particular emphasis on its balance sheet and cash flow; secondly, on HR and R and D; and, finally, in terms of sales and marketing. In commenting on this debate, many colleagues have referenced the world competitiveness rankings. It is worth reading on a bit into the assessment that the World Economic Forum made:
	"The United Kingdom (10th) continues to make up lost ground in the rankings ... rising by two ... places and ... moving back to the top 10 for the first time since 2007. The country improves its performance across the board, benefitting from clear strengths such as the efficiency of its labor market ... in sharp contrast to ... many other European countries".
	The assessment went on to say that the UK has,
	"sophisticated ... and innovative ... businesses that are highly adept at harnessing the latest technologies for productivity improvements ... On the other hand"-
	and I emphasise this point-
	"the country's macroeconomic environment"-
	it is ranked 85th-
	"represents the greatest drag on its competitiveness, with a double-digit ... deficit in 2010 (placing the country 138th)",
	in the international league tables.
	I mention that report because it is sometimes unfashionable to mention things such as controlling the deficit, which in this case is plan A, in strengthening our competitiveness but it is fundamental because unless we get the public finances under control, our AAA rating is at risk. France has already been downgraded and the only way that we are clinging on to that rating is by virtue of the fact that the Government are committed to getting that deficit down-and they have made progress on that. The deficit has reduced by about 25%, going down from £13.9 billion to £10.8 billion and is set to go down to £5 billion by 2014. That is fundamental to our success. As much as we want to herald the sales and marketing side and get excited about that, we sometimes need to remember that there is a real job of work to be done in keeping that deficit under control.
	As managing director of the IMF, Christina Lagarde was absolutely right when she said that she shivers when she looks back to 2010 and considers what could have happened without fiscal consolidation in the UK. If we lost that AAA rating, the cost of our borrowing on the international markets would rise, not only for government but for corporations. The rise in those interest rates would force many firms out of business, and reduce our competitiveness on the international market. Repairing the balance sheet is obviously critical, but there is a second set of measures that need to be taken which come under the broad heading of supply-side measures. We cannot simply say, "We want to repair the balance sheet". We need to make ourselves more competitive in the process. I believe that that is happening, most notably by reducing corporation tax rates, which now give us the lowest rate in the G7-and by the end of the Parliament we will have the lowest corporation tax in the G20; by raising the threshold of personal income tax to £10,000; placing a cap on benefits to ensure that people are always better off when they are in work; reducing taxes on jobs; reducing regulations; investing in infrastructure projects, such as £16 billion in Crossrail; the Green Investment Bank; the regional growth fund; public service reform; and by rebalancing the economy away from a dependence on financial services to manufacturing. Mention has been made of how manufacturing declined dramatically as a share of our international trade; that trend is now reversing. In my native north-east, we are celebrating the fact that we have had record exports for the second quarter in a row, and this is in the midst of a recession. It is quite phenomenal that this is happening. It is a reason to be encouraged; however, we need to reform public services and rebalance the economy. We also need to introduce rigour into the education system, enhance skills through expansion of apprenticeships and bear down on excessive regulation, despite the current legitimate outrage about LIBOR. We must remember that excessive regulation destroys jobs, and we want to be in the business of creating jobs.
	On the banking crisis, there needs to be an honest conversation with the electorate. It will rightly join everybody in "banker-bashing", as it is affectionately known in the press. The banks may well be-I am sure that they are-part of the problem and the reason why we are in this mess. However, it is only by the banks lending to small and medium-sized enterprises that we can get out of this. So we need to have a way forward. I would like to suggest that, rather than pillorying the banks, looking for fines, changing the regulations and so on-though I am sure that all that is right-it would be better for the banks themselves to come forward and say, "We realise that we have let this country down; we have let down small and medium-sized enterprises; we have not been lending as we should have been, despite our balances improving. We are going to engage in some restorative justice, by looking in the eyes of the people whose loans we have turned down and whose businesses have closed as a result, and apologising for that. We will go that extra mile to see how we can help British business export and compete in this market".
	I come to my final point, which is this. We must recognise that we have a bit of a confidence problem in this country at the present time. It is very much doom and gloom; a number of colleagues have referred to this. However, it is worth looking at the facts. The eurozone is undoubtedly in a mess; we are not doing particularly well. America is only doing slightly better. But that is not the true picture. The Office for Budget Responsibility points out that this year the economy will grow by 4.1% and next year it will grow by 6.4%. If we take world GDP as being roughly $70 trillion, 4.1% growth means that added to the world economy we will see a market for our business the size of France. Next year we will see added to the world economy, or a market for our business, an economy the size of Germany. Sure, exports to the EU may be down by 2.9% but exports to non-EU destinations have increased by 13.3%.
	We will be welcoming the Olympics in a few weeks' time and the world's eyes will be upon this country. It is fantastic that the Government are tapping into that with its GREAT campaign, highlighting the great place that Britain is. More than 4 billion people will watch the opening ceremony. The GREAT campaign is tapping into the fact that this is still an outstanding country, despite its problems. It is a world financial centre; it is a world transport hub; it is the legal basis of international trade; it has the language of international trade; it is home to the top university, Cambridge; it has the winner of 76 Nobel prizes in science and technology-and we remember that in the week that we acknowledge the contribution of Peter Higgs, the theoretical physicist, to that list. It is the centre for the creative industries: Adele, Coldplay and Jay Sean accounted for 12% of global music sales and 23 Grammy awards. On sport, we are the home to Formula One, Wembley, Wimbledon, Lords for cricket, Newmarket for horse-racing, St Andrews and, of course, the birthplace of the Paralympic Games, in which we take immense pride. This is a great country and we have a lot to celebrate about the way we are going.

Lord Selsdon: My Lords, I am grateful to my noble friend Lord Jenkin of Roding, who has an ability to set the scene; it makes it very difficult for those who follow. What I have just heard from my noble friend is almost a layout of what the immigrants should learn if they are to come to the United Kingdom.
	I shall take as a theme, "We have been there before. It has already happened, so why are we repeating ourselves?". When I have nothing better to do, I write White Papers about things that I think should happen. The noble Lord, Lord Stevenson of Balmacara, a fellow Scot, will remember what we were taught in early days: if a man had no estate, there were only three things that he could do. First, he could help other people to do it, in which case he joined the professions. Now, though, for all the professions-accountancy, law-there is doom and gloom, because they find reasons why you should not do something. Or he could take the credit for those who did it, in which case he went into politics. However, if you were a real man, you went out and did it. The noble Lord was sitting as a lone ranger on his Benches. I am not saying that there is no interest on his side-I used the past tense.
	I will go back and say, "We've been there before". I take as my theme today, "Yesterday's story". If we go back into the past, this was the sort of phrase that was given as an instruction to government-in this case, a guide for the Board of Trade, saying that it should,
	"take into their consideration, the true causes of the decay of trade and scarcity of coyne ... and to consult the means for the removing of these inconveniences".
	That was in 1621. I can give you one for every year; there is a wonderful book on the history of the Board of Trade. It has gone out of print and I have just rewritten it. I hope that I can give you others.
	What successive Governments did was to forget the past. They went and got rid of the Board of Trade and put in place something called BIS-the sort of thing that dogs do before breakfast. No one understood, and the word "business" was divisive. I chaired various trade bodies and went on trade missions, always to places where no one else wanted to go. That was usually at the instigation of two great Leaders of this House, Lord Jellicoe and Lord Shackleton.
	Lord Jellicoe said one day, "My dear chap, you ought to do a bit more to help the House. I'm going to put you on Sub-Committee B on the European Union". I said, "What's that?" He said, "Liven it up a bit-it's meant to do something about trade". There were only three members of that committee: Lord Dennis, myself, and I have forgotten the other one. We went to a series of meetings and we were not sure what we were talking about. We really thought that it ought to be about trade. Then one day we had a visit from the Chancellor of the Exchequer, the noble Lord, Lord Lawson. He sat with these distinguished people; the committee was called the Aldington Committee. We asked him a few questions, although I personally was never able to ask a question because I did not like to intervene among my elders and betters. When we were having discussions about money supply, which seemed to be more important than trade, Lord Amery asked for an explanation. The Chancellor at that time said, "I'm not quite sure if I can get up to your level". He made an explanation that led to the famous remark from Lord Amery, "I am very grateful, Chancellor, for your explanation. I am most confused but very happy to be more confused at a much higher level".
	Today we are talking about the same sorts of problems: money or trading finance. We have forgotten some of the basic principles. You see, we have a trade deficit in visibles, or in manufactures, of £100 billion, rising at 10% per annum. I always take everything back to when my great-uncle Stafford Cripps devalued the pound in 1948; I have a schedule that runs through that. We have a deficit, and we finance it in part with what I call "invisibles". Your Lordships may remember that Sir Cyril Kleinwort created the Committee on Invisible Exports that used to wander down from the City to try to lobby their Lordships and others in order to get us to do something to support trade. That soon disappeared, but the invisible surplus is not enough to offset the deficit, and it is getting worse.
	We then went into the EU, your Lordships may remember. I was treasurer of the Conservative Europe Group because no one else would take the job, and together with the noble Lord, Lord MacGregor, we had to raise money because the Labour Party did not want to go into Europe at all; they were totally against it. We had a vote in favour here in your Lordships' House-very nearly a greater vote than for the abolition of hanging-and we went into Europe, as though that would be the be-all and end-all.
	I do not believe in exports and imports; I just call it trade. You have a good trade or a bad one, but you trade with anyone who is willing or able to pay, provided that you like them. As soon as you would use the word "business", the Foreign Office runs away and says that it cannot be seen with a businessman, a box-wallah. The same went for Ministers at home because it seemed wrong to be looking at trade in this sort of way.
	When we look around the world today, we find that our biggest single deficit is with the EU. The phrase that we adopted in those early days was, "Britain in Europe: it's our business to be there". It was not about a political wish or the controls that would come later, it was simply about business and trade. So we have a thumping great deficit with all the EU countries except Ireland, where we have a surplus. However, some of that surplus comes from containers that arrive in England and then are shipped across to Ireland where the added value goes, because the Irish would not have the money to pay for the amount of trade that we do with them.
	That is all just to set a bit of background. I feel that we should go back into the past and look at what the Board of Trade was established for, along with some of the roles played by your Lordships, a subject that has been raised away already. One of the key elements of trade-good trade rather than bad-is relationships. This has often been a difficult problem for those who go on all-party group visits, missions and so on, when you wish to discuss the concept of business. Your Lordships' House, with its 800 Members, has a relationship with every single quarter of the world, and we are still respected. My noble friend Lord Green knows that well. For some time I was president of the British Exporters Association, although that now consists almost entirely of financial institutions-there are hardly any manufacturers left.
	If we are looking at where we end up in future-we have raised both the Commonwealth and new markets-the financing of trade has always been one of our skills and it was one of my own responsibilities. At one time it was not necessary to get government guarantees for anything if you had reciprocal trade. We would often go out and sign individual reciprocal trade agreements with any country where you could buy something and then finance it by selling. I will use the simple example of Cuba. We did not have a good relationship with Cuba, but Lord Walston did. He was a Labour Peer and a very good friend of mine; he was not allowed to go to Cuba officially but was allowed by the Foreign Office to visit it on his way to his plantations in another part of the Caribbean. He knew Castro well and we had a few discussions. We said, "What can you sell?". Naturally, we were all thinking of cigars or rum, and had forgotten that Bacardi was originally a Cuban product. They said, "We do very good grapefruits". I sighed, "Oh God". Anyway, I was lucky enough to know someone at Marks and Spencer, so I picked up the phone to them and said, "The Cubans do a rather funny sort of pink grapefruit. Will you buy some?". They said, "Yes, why not? Tell them to send a shipload". I turned to the Minister and said, "Could we send a shipload of pink grapefruit?". That all started with a simple trade.
	In those days it was quite difficult when we did not have good diplomatic relations. I found this when I chaired the Middle East trade committee. I could go to Iran, Iraq or any one of the Arab or Middle Eastern countries totally free and unencumbered, because I would be invited. You did not need security; indeed, often it was dangerous if you got together with your own embassy. You would be told, "No, diplomatic relations are not good enough at the moment to be able to prosecute trade". I never understood that word "prosecution"; it has something to do with following on, but it always seemed a rather negative phrase.
	What I am saying quietly here is that we within your Lordships' House should give consideration again to all those bodies-the British Overseas Trade Board, which was chaired by Lord Jellicoe, the East European Trade Council, which was chaired by Lord Shackleton, and all the others-where individuals and their friends had relationships, often historic, with all these countries, and that could run across the Francophone territories and all the Commonwealth. As my noble friend Lord Sheikh has said, the Commonwealth is a great opportunity.
	I have no fears. I just feel that we have subsumed ourselves in the most complex bureaucracy around. Ministers are not really allowed to do business or to sell, although they can come and promote and talk. If your Lordships' House can identify those people who might be willing to help, then I feel that we have a great sales force.

Lord Paul: My Lords, it is an honour to follow the noble Lord, Lord Selsdon. For the 16 years that I have been in this House, I have always been afraid to follow him, because how would I keep the House amused?
	I thank the noble Lord, Lord Jenkin, for sponsoring this important and timely debate. He has great experience both in industry and in government. The noble Lord might recollect that as a very young entrepreneur I came to see him when he was Secretary of State, and he was most helpful.
	As chairman of the Caparo Group, an industrial manufacturing company, I declare an interest. Competitiveness is vital for the future of our country's economy, and nowhere is that more significant than in manufacturing. Having been intimately engaged in that activity all my life, your Lordships will appreciate why I will focus largely on that sector. After a long while, the manufacturing segment of our GDP has shown an appreciable increase in the past three years. That is intrinsically commendable, but it is not enough. Britain is now the ninth largest manufacturer in the world, although that is a far cry from our ranking in the past. My own experience and evaluation tells me that, given the appropriate encouragement, we can substantially enhance that position.
	Our manufacturers are doing almost everything they can and, encouraged by the progress made in recent years, are keen to do more. However, for Britain to get the fullest benefit of their endeavours there must be a much more supportive environment. Today, many manufacturers feel that a more positive and creative approach by the Government would help to engender the conditions that would enable them to maximise their potential.
	There is considerably more that the Government can do to structure the context in which manufacturers can achieve a higher level of competitiveness, a condition that would be of great benefit to the country as a whole. We live in a world of globalised interaction, a world in which many Governments encourage and support their manufacturing industries. We need to do this, and fast, otherwise others will gobble up the gains that we have so resolutely made.
	Here are a few suggestions for consideration that can be implemented in short order. Above all, there is the question of inadequate access to finance. It is now almost four years since the onset of the banking crisis, with its crippling impact on credit availability, particularly to small and medium-sized manufacturing enterprises. Despite government initiatives such as Project Merlin, the money is just not flowing, even from the institutions within its control such as Lloyds and RBS. In view of this, it is now imperative to create a new corporate institution dedicated to industrial finance, a high-powered, well-endowed industrial bank of a kind that I have been advocating in this House and elsewhere since this financial crisis began in 2008.
	I have two other concerns in this financial domain. The first is the cost and time-consuming effect of red tape. Despite occasional reassurances, the bureaucratic tangles of regulatory consent and like procedures continue to escalate. Of course we must have protection, but our excessive foot binding is making it easier, cheaper and less risky to establish projects in countries where these burdens are less onerous. My second concern is the consequence of the current exceptionally low interest rates on the overhanging pension burdens on business. Two weeks ago in our debate on the economic growth strategy, I drew the House's attention to the serious impact of this looming thunder-cloud over the competitiveness of industry. This needs to be addressed and addressed fast.
	If our competitiveness is to be sustained, we must rethink energy pricing policy. While I strongly endorse environmental efforts to prevent the destruction of our ecological heritage, we need a sense of balance. The competitive struggle is a tough, international battle that is hard to fight with one hand tied behind our back. There are industries in which energy is a major component of production. Try as one might, it is simply not possible to avoid or reduce this. Our energy pricing is such that our production languishes while our industrial competitors' energy costs are considerably below UK costs. Our present system of carbon taxes is basic to this problem. It is just not working. Up and down the supply chain of many remaining heavy-process industries, jobs are being lost and businesses are in trouble.
	Innovation is the lifeblood of competitiveness. It can be achieved only through better skills and training and the enhancement of industrial education and research environments. There are two ways in which we can accelerate this process. Large companies already maintain their own facilities to supplement public sector education. Through appropriate tax and other incentives, we can encourage these larger corporates to mentor less well endowed mid-sized businesses to establish jointly the type of technical institutions in which innovation and creativity will flourish.
	In my distant youth I was a student at the Massachusetts Institute of Technology. There I saw how the Government and the corporate sector worked with the universities to carry out industrial research for which the universities were paid. This strengthened the financial position of the universities while providing innovative ideas and product design to the corporates and to the Government. Ever since, as your Lordships know, I have strongly endorsed these synergies. We have made some progress in this but I suggest consideration of a crash programme in which government resources anchor such interconnections. With other countries increasing their research budgets, perhaps we can offset our own financial limitations through such a pooling of resources and expertise.
	Industrial investment is a long-term process and industry needs a clearer sense of economic direction in order to help that investment. The biggest issue for industry at the moment is the banking crisis. This is so fundamental to our national economy that it must be investigated intensively and resolved. A resolution must avoid any political point scoring, as the whole country needs to have its faith in the financial sector restored. The LIBOR fixing has adversely affected everyone. It has hurt the reputation not only of UK financial services but the country as a whole. We cannot afford that. The Minister is, in my view, one of the best people to give advice on this subject, and I hope that the Government will seek his wise counsel, despite his being in a different department.

Lord Cavendish of Furness: My Lords, I am pleased to join others in thanking my noble friend Lord Jenkin of Roding for introducing this debate with such skill and clarity. His reputation brings an enormous amount to this House.
	My purpose in intervening today is to draw attention to the obstacles that prevent SMEs, in particular, from being competitive. Since those obstacles are real, in my view, I see no merit in being mealy-mouthed about them. It should be recognised that during the years of financial services hubris, those of us who do things, make things or grow things became highly unfashionable and only slowly are we emerging from those dark days and those perceptions. It appears to me that Governments used to ask bankers how the economy worked. When their fallibility became apparent, advice was sought from the owners of supermarkets and big business. It is my contention that the people that Governments should have been talking to are those who work in the sector of small and medium-sized businesses that make up such a very high proportion of this country's productive capacity. It is they, and perhaps only they, in the short term, who can deliver growth and investment and they stand ready to do so if only this coalition Government have the will and the courage to unshackle them and let them take flight.
	I know that the Minister will point to measures he has implemented and plans to implement in the future. Of course, there are improvements and they are appreciated. I do not mean to underestimate the challenge that this coalition faces or ignore the real achievements in the face of these challenges. It has brought onto the statute book three very major reforms, the main benefits of which, as with many reforms, lie in the future.
	I operate, as I have done for the past 40 years, in that very sector which I so passionately believe is crucial to national recovery, investment and growth, and that brings me to declaring an interest. I have beneficial interests in a landed estate based mainly in south Cumbria. The estate's activities include farming, forestry, property management, leisure, tourism, minerals and housebuilding. We also own and run a racecourse and have 250 people on the full-time payroll, 150 of whom are engaged in extracting, processing and selling slate, a significant proportion of which goes to markets around the world. On the question of exporting, I believe that a successful exporter has a mindset, more than anything else. If I can dig stone out of the Cumbrian hills and send it to the other side of the world, it ought to give encouragement to other exporters.
	Let me remind your Lordships what the SME sector comprises. There are 4.5 million small businesses in the UK. They account for 58.8% of the private sector and nearly half of all private sector turnover. In 2010, family businesses contributed £81.7 billion in tax receipts to the UK Exchequer, or 14% of total government revenues. The barriers to growth and investment under generic headings are well known to the Government; perhaps less well understood is the disproportionate impact they have on the sector where I have some experience. The burden of reporting to government departments on such things as PAYE, VAT and national insurance not only grows remorselessly, but those departments do not work to the same standards and timescales as is the norm in the private sector. All entrepreneurs in this sector will rightly point to employment and health and safety laws and their implementation; a lack of credit, widely rehearsed in this debate; and planning delays and regulation as being among the main factors that inhibit growth and job creation. I shall say a word on each and address some other considerations that are sometimes overlooked. I was hoping that other noble Lords would cover the importance of broadband, which I know is a very important aspect of this.
	Decent people believing in the rule of law have always defended the principle that justice is worthless unless it is accessible to all. People need and deserve protection from unscrupulous employers and I suspect that the reputation of tribunals for being one-sided in favour of claimants is sometimes exaggerated. However, something is very wrong-I suspect that it is the law itself-when I consider how attractive the system seems to be to vexatious claimants. It is also cumbersome and pitifully slow and therefore costly in terms of time and money.
	Charities are particularly vulnerable, made worse perhaps by the Charity Commissioners' understandable but strong guidance that claims should be settled rather than defended. I have personal experience of this through my local hospice, which I co-founded and was involved with for nearly 20 years, which was nearly ruined by a vexatious claim. I especially ask my noble friend Lord Green to take note of this. Charities play an ever-increasing role in society and I emphasise that they are significant employers and, as such, are very much part of the national economy.
	It is above my pay grade to suggest how the law might be changed, but it is plainly true that the impact of employment laws on a small enterprise is different, and by magnitudes greater, from what it is on a large one-a point made eloquently by my noble friend Lord Brooke. In the matter of planning, authorities have apparently cut back on resources; that is something which they had to do and it seems right to me. However, they have done this without changing their methodology. I ask myself this: when all of us have found ourselves forced to do things more smartly and efficiently, why has so little been done in the public sector to do likewise? The effect is plain enough. Nearly 70% of those seeking planning decisions are having to wait longer than the legally required eight weeks. What makes this so scandalous is that about a quarter of such applications are for change of use and a quarter for minor improvements. Every planning permission generates economic activity and all delays costs jobs.
	Across my own business, as I speak, 20 jobs are being withheld pending delayed permissions that have been agreed to in principle. Only today I heard that the retirement of a person in the highways department was given as the reason for a local housing development being delayed for six months. Just imagine the effect that that has on employment. My family business is at an advanced stage of considering installing an anaerobic digestion plant to generate green energy. As a consequence of government prevarication on several fronts, together with an estimated two-year delay in securing permission to connect, this project is now on hold. Again, although we can all applaud the intentions of the national planning policy framework, I am bound to say that I reserve my position until I see how it is interpreted at the local level and by the planning inspectorate.
	In reaching a view as to the impact of regulation, I have relied on my own experience and that of my neighbours in Cumbria. By the time someone employing three people has completed all regulatory compliance, by my estimation he or she has lost in a working week the best part of a full day. On top of that, there will be the direct cash costs of compliance to be earned. I will cite two examples. I know a brilliant self-employed precision engineer who does work building submarines in the shipyards at Barrow and also in the nuclear industry. He is the sort of person this country really needs. He has an order book that would merit his taking on two or three additional people. He would be willing to train young people. He cannot and will not employ anyone until he sees at least some of the burdens removed and the high personal risk of employing people reduced.
	My second example, moving from the sublime to the ridiculous, goes down to the farm. Under Defra's electronic tagging system, if a sheep tears a tag out, as frequently happens-there is an animal welfare issue there-the farmer is obliged to identify it by reading the tags of every animal in the flock. Did anyone think to consult a farmer before such a crass regulation was introduced?
	Another, largely ignored, casualty of all this suffocating red tape is civic involvement. I notice this especially among the farming community who, in my part of the world, have a strong instinct to participate in local affairs. I harbour the suspicion that among the official class the squeezing out of such people who possess a deep understanding of their communities is not entirely unwelcome. I can almost hear Sir Humphrey saying, "Intelligent and experienced people interfering in local government, Prime Minister? That is the very last thing we need".
	One other factor playing an increasing part in eroding our competitive edge is the utilities. I cannot imagine what possessed our predecessors when they created these powerful private monopolies. As one neighbour says, "You have to pay them a huge cheque before they get out of bed". They are more statist than the state; more statist even than the BBC. In the countryside, all of us have no option but to engage with them. They are completely unresponsive to customers, ruthless in their financial dealings and the services they offer are often exorbitantly expensive. I will go so far as to say that unless the worst offenders are compelled to change their ways, they will continue to exercise a baneful effect on the British economy.
	With some honourable exceptions, the utilities culture actually pervades all the agencies of the state to some degree or other. I sit on these Benches basically because I believe in a small state. I hold to the view that I have always held: whatever the state does, it does badly and expensively. As an example, the famous NHS IT system budgeted at £2.3 billion was abandoned when it passed, according to some figures, the £20 billion mark. I do not remember anyone being shot at dawn. All I heard was some tut-tutting and talk about lessons being learnt and lines drawn.
	It was therefore slightly offensive for those who are law-abiding to be told by Ministers that there was no distinction as between tax evasion and tax avoidance and that both were equally reprehensible. One is legal and the other is not. With the record all Governments have of husbanding our hard-earned money, one might reasonably conclude that the more I keep for reinvestment and the less the Treasury gets its hands on, the better for everyone and the better for the country. Besides which, most of us are willing to pay taxes for the public services we value.
	I finish with an experience from last week. My company is considering the purchase of a struggling business in a remote part of Spain that might add to the diversity of our operations. Negotiations are at a very early stage and I cannot even guess at what might be the outcome. Despite that, at all levels, Spanish public officials are going to enormous lengths to facilitate these negotiations with the unambiguous purpose of saving a Spanish business and the Spanish jobs that go with it. Compare and contrast that with the culture of our own public sector. We simply do not have the right culture.
	I see that my time is up. I do believe that we have the wrong culture. Unbelievable expenses are placed on SMEs. It may take a generation for the culture to change and become what it should be. But at this time of severe crisis when most of Europe has rendered itself uncompetitive, now should be the moment to change the way we do things; now would be the moment for Ministers to insist that public servants put themselves at the disposal of the public, as some of us older people remember that they used to. Even if a start was made at removing the worst of these burdens, even if the flawed culture begins to move in the right direction, then the SME sector stands ready to respond and will, I am confident, lead us out of these dark days to growth, prosperity and full employment.

Baroness Warwick of Undercliffe: My Lords, I am grateful to be permitted to speak briefly the gap in what has been a really stimulating and erudite debate. I will make a simple point, which has been referred to tangentially by several other noble Lords in today's debate. The Government are looking for trade and export-led growth, and a key sector for such growth is higher education. Indeed, there is a Lords Select Committee currently looking at SMEs and growth that is highlighting the HE factor as an essential component.
	Depressing figures on growth are regularly quoted in the media and, indeed, in this House. I need to avoid being a Pollyanna, but there is a mechanism with a proven track record that deserves support in the current climate. I am talking here about the role played by the UK's research base and our higher education sector in contributing to the international competitiveness of the UK. Noble Lords will have seen for themselves the calibre of research taking place up and down the country, the extent of collaboration and knowledge transfer, and the success of our research clusters in attracting inward investment.
	While we are undoubtedly in difficult times, it is worth saying that the UK has one of the strongest university research sectors in the world. Our research activity both attracts inward investment and generates export income from a global market. Many global companies-I think immediately of BP, Siemens, GlaxoSmithKline, Boeing and Rolls-Royce-have established successful collaborative research partnerships with UK universities. Our world-leading institutions have a crucial role to play in helping the UK survive the economic downturn and work its way back to economic growth. One example is that the Technology Strategy Board has just announced that one of its technology innovation centres, for stem cell therapies- I declare an interest as chairman of the Human Tissue Authority-will be established at Guy's Hospital in London because of its credentials as, among other things, a large research and teaching hospital and its access to world-class universities. The UK will be ideally positioned to gain a substantial share of this young industry, due to its leading position in the science of stem cells and regenerative medicine. The noble Lord, Lord Kakkar, gave many more such examples in his tour de force of a speech.
	The Universities UK report, Driving Economic Growth, makes the case that higher education is a "core strategic asset" to the UK. I was pleased to see last week that, as part of its response to Sir Tim Wilson's recent review, the Government announced the creation of a new national centre focused on strengthening the strategic partnership between universities and business, with a view to driving economic growth and recovery.
	My plea to noble Lords and the Minister-my friend-is to ask: what further support can be given by the Government to university and business leaders as they work together to address the challenge to the UK of the global economic downturn?

Lord Stevenson of Balmacara: My Lords, we are grateful to the noble Lord, Lord Jenkin of Roding, for giving us the opportunity for an economic debate this afternoon.
	The eyes of the public may well be on the Commons and the ongoing question of how best to review the latest banking scandal, but the issues raised in the Motion are very important. It will be in all our interests as a nation if we can improve the international competitiveness of UK industry, stimulate more inward investment, grow our exports and create jobs-and thereby end this double-dip recession made in Downing Street.
	We have had a very good debate, with strong contributions from all sides. As has been mentioned, there is great expertise in your Lordships' House. Much of that has been on display to great effect today. Any debate containing an erudite, literary and amusing contribution from the noble Lord, Lord Brooke of Sutton Mandeville, has to be cherished.
	The noble Lord, Lord Jenkin, asserted that there was a growing consensus that technology and innovation would be the key driver in an export-led recovery by our manufacturing companies. I assume that in saying that he was echoing, at least in part, the recent remarks of the Secretary of State for BIS when he complained to the Prime Minister that this Government have no,
	"compelling vision of where the country is heading",
	that their actions were piecemeal, and that they had no,
	"clear and confident message about how we will earn our living in the future".
	After all, reading from a Library note which was prepared for this debate, and which contains a lot of very useful information, the situation is far from being satisfactory. The ONS reports that the deficit in net trade was £3.7 billion for quarter 1 of 2012 compared with £2.2 billion in quarter 4 of 2011, and that the month-by-month changes to the balance of trade provide a challenging outlook for the health of UK trade. On FDI, the ONS says that 2010 was a "relatively quiet year", with,
	"flows of both outward and inward at their smallest for several years".
	Generally on the state of the UK economy, the OBR said in March 2012 that it expected UK exports to continue to be supported by the depreciation of sterling which began in 2007. Of course, however, that beneficial situation has now reversed, largely because of the euro crisis.
	The OECD describes the recovery of UK exports after 2008 as "disappointing", particularly in light of the depreciation of sterling. On job creation, unemployment is now 2.61 million, or 8.2%. As the noble Lord, Lord Sheikh, said, it is over 20% for 16 to 24 year-olds; and the headline figure is up 0.5% over the year. As my noble friend Lord Liddle said, we seem to have wasted the opportunity created by our ability to devalue our own currency, so as to grow our exports. We have stifled domestic demand, and we have massively increased social costs because of increased unemployment. It is not a pretty picture.
	We are also living through a period of seismic, rapid, global and technological change. The Government, as outlined in the last Budget, seem to be relying on a single policy, one of increasing exports,
	"as companies capitalise on global opportunities".
	This will be tricky if, as the last OBR report predicted, there is lower than expected growth in the world economy. So what can we do? There needs to be a twin-track approach, boosting the UK's capacity to export goods and services, which we would all like to see, with an active government approach, as outlined by my noble friend Lord Liddle, and-this is also very important but rarely discussed-focusing on reducing our dependence on imports.
	As many noble Lords have said, our chances of success in the global economy will not come from being quite good at lots of things. There is a premium on being the best. We must develop our areas of existing strength-sectors, technologies and services-where we are already world-class, such as the advanced manufacturing, aerospace and automotive industries, business services, life sciences, the creative industries, higher education, and, yes, financial services. Do the Government accept that they need to get behind these sectors, and do whatever they can to ensure that they prosper and can sell their goods and services abroad? Can the Minister update us about the current BIS schemes which support and underwrite our exports? Also, in response to the question from the noble Lord, Lord Jenkin, can he let us know what the department are doing to help SMEs in particular export more?
	Other countries are already pursuing active government approaches. We need to match the best of what is out there. Just because the Americans preach a gospel of free markets does not mean that their Government have not made huge interventions in markets through vehicles like DARPA, the Small Business Innovation Research programme and the National Institutes of Health. Look at Germany with its national investment bank, KfW; its centres of technical and vocational training and research, the Fraunhofer institutes; and its network of 426 local banks providing credit to businesses, the Sparkassen. Look at SPRING Singapore. Can we not match these activities? Institutions like these support business development and growth, provide stable finance, allow for information to be shared, foster innovation and encourage its dissemination, and develop the skills base on which businesses can build. We do not seem to have these institutions in the UK, and BIS does not deliver these services at present. That is why we on this side are looking at plans for a British investment bank.
	This is not only about getting individual parts right. It is about the whole. It is about competition policy being reinforced by procurement policy. It is about taxation and regulation reinforcing the strategic direction agreed with business. It is about ensuring that the finance, education, training and skills and infrastructure are there for businesses of all sizes. I hope that when he comes to sum up, the Minister will reassure us that he shares this vision of an active Government working together with businesses large and small across the country. In so doing, he will want to pick up on a number of the points raised by noble Lords in this debate. I have a long list here. I would like him to focus on four or five; perhaps he can deal with the others in correspondence.
	The noble Lords, Lord Paul and Lord Jenkin, have also mentioned this: our training problems are long-standing and have never been resolved. There is no coherent plan, particularly for the 50% of people who leave school and do not go on to university. Where are the integrated procedures, and who is responsible for ensuring that these people move forward to proper jobs and have a training for life?
	There have been a lot of comments about UKTI, many of them complimentary, but there were questions asked about whether it could do more in-country work. There was also a question about whether it would move away from the point-of-sale promotion which it currently engages in, towards bringing new companies and their products to world markets. There is also an issue I would like the Minister to respond to at some point if he can, which is whether we could build more concern for human rights in business into the work which UKTI does.
	We heard a lot about the need to stimulate innovation; we also heard some good stories of work going on, both from the noble Lord, Lord Kakkar, and from my noble friend Lady Warwick. Again, this needs more government support and activity, particularly as we think about the way e-commerce can help. We were all impressed by what the noble Lord, Lord Kakkar, said about telemedicine. The noble Lord, Lord Paul, and many others, talked about the finance requirements for SME growth, and there was a general concern about the way in which money was not flowing yet from the banking system to support our industries.
	We also heard about the need for spending on infrastructure to support our work across the various activities that have been referred to. These are matters which we hear a lot about, but again there are no plans coming forward.
	Finally, I argue that we also need to focus on activities on which the UK has an opportunity to reduce its import dependency, and in so doing assist the development of a more equal society, as mentioned by my noble friend Lord Haskel. According to a recent report from the Centre for Research on Socio-Cultural Change, the pigmeat supply chain is going through a prolonged and unresolved crisis. The size of the national pig herd has declined by around 50% over the past decade, while over a similar period the UK has gone from 80% self-sufficiency in pigmeat to less than 50% self-sufficiency. Clearly, this worsens the UK's trade deficit and diminishes UK employment. This is a classic example of UK failure in tradable goods against north European competitors. The UK's growing volume of pigmeat imports come not from low-wage eastern Europe or from Asia, but from northern European countries, which now provide more than 50% of the UK's bacon, despite their wages being almost double and their labour market being much less flexible.
	The authors of the CRESC report argue that because the UK Government take a narrow "competition is best" policy, UK policy interventions have always been limited to a series of unsuccessful voluntary initiatives that did not recognise that the form of competition being practised in this market is, in fact, the problem. In Denmark and Holland we find that government support for the creation of co-operatives and assistance with marketing for artisanal producers has transformed the capacity of their producers to negotiate with the supermarkets, and has stimulated them to export to other markets like the UK. Changing the food processing industry in the ways suggested increases margins and reduces costs, and society gains through reduced import dependence, higher wages and more stable employment. I hope that this morality tale about restoring the great British bacon sarnie commends itself to the Minister. I look forward to his response.
	The noble Lord, Lord Paul, called for a common cause on this issue and I agree. We can surely all get behind a sustainable initiative in this area because the prize is a UK economy that is richer, fairer and more productive, positioned to succeed in the growing markets of the future with the right capabilities to do so.

Lord Green of Hurstpierpoint: My Lords, I thank my noble friend Lord Jenkin of Roding for initiating this important debate and raising the issues with such clarity. Strong trade and inward investment are of course vital to our economic success going forward-on that the whole House seems to be agreed. I thank my noble friend, too, for his kind comments about my role. It is perhaps worth noting that I have spent a fair amount of time in recent weeks and months travelling to 40 different countries as well as continuously around this country. This is not just industrial tourism; this is about understanding the issues that businesses face at this end and at that end in order that we can plan appropriate support going forward.
	One lesson we all learnt from the 2008 crisis was that the old growth model is bust. In the run-up to the crisis there was too much growth based on domestic consumption fuelled by debt, and we know that we cannot continue to drive growth in that way. We also know that we cannot rely on government spending also fuelled by debt to drive growth either. The economics textbooks tell you that there are only two other sources of demand in any economy that can drive growth and create jobs-they are, of course, investment and net trade. I would like to talk briefly about each of those.
	First, on investment-and focusing especially on foreign direct investment, which plays a key and strategic role in the UK economy-nearly half of total output in this economy is supported by foreign direct investment, a figure which is significantly higher than in France, and much higher than in Germany, America and elsewhere. It is a clear source of competitive advantage to us that the UK is, and has been for many decades, so open to foreign direct investment. It is a cultural orientation which has enabled-famously-the regeneration of the UK automotive industry since the 1980s by Japanese, German, American and now Indian investment. Iconic British brands such as Jaguar Land Rover, the Mini, the Rolls-Royce and the Bentley have been strengthened and revitalised by investment from Germany and India. Innovative cars are being developed and built in Britain now and exported around the world. One-quarter of all of Ford's engines are built in the UK. The Japanese investor Nissan builds cars in Sunderland and exports some of them to Japan. An impressive 83% overall of cars built in the UK are now exported. The link, therefore, between foreign direct investment and exports is clear.
	It is important, however, to remember that it is not just the automotive industry that we can use as an example here-the aerospace industry is another case in point. Airbus and Bombardier, to name but two examples, play a part in an industry that has a 17% global market share. Another recent example of a different kind of openness to foreign direct investment is the China Investment Corporation's investment of 8.7% of Thames Water. The interesting point about that investment is that it has caused so little comment or nervousness in the British public domain. Can you imagine the same being true if a Chinese sovereign wealth fund invested in the water supply of either New York or Paris?
	It is important that we remain an attractive destination for FDI, which means ensuring that our tax regime is attractive, that we minimise unnecessary red tape and that we have a planning regime that is fit for purpose. I know that the whole House will agree with me when I say that a lot of work needs to be done, and is in hand, under those three headings. The headline rate of corporation tax is the most visible sign of how competitive a country is and we are cutting that to 22% by 2014. That will be the lowest in the G7. We are supporting innovation through the patent box and R and D tax credits, and high-growth companies with programmes such as the enterprise investment scheme.
	A crucial area where we need to attract FDI is not only in productive activity but in the public economic infrastructure. A number of noble Lords have referred to that issue. The kindest friends of this country would not accuse it of having a world-class public economic infrastructure. Infrastructure UK, a body started by the previous Administration and continued and developed by this one, has been developing increasingly specific project-based plans for investment in transport, energy, water and broadband networks which we will need if we are to compete effectively in the 21st century. It is estimated that around £250 billion of investment will be required between now and 2015, the bulk of which will, of course, have to come from private sector capital working in harness with the Government. That capital will come from foreign institutions, from domestic institutions and also from sovereign wealth funds. A lot of work is being done on that. This is a long-term programme that we have to keep at.
	Our regulatory environment is another important signal for overseas investors in this country. We are often, quite rightly, very critical of ourselves, but actually we have a strong reputation overseas for transparency, predictability and the rule of law, and we must never lose this. According to the World Bank, the UK ranks seventh in the world for the ease of doing business and second only to Denmark in the EU. The UK has the fewest barriers to entrepreneurship of any country in the world. It takes 13 days to set up a business here, which is two days fewer than in Germany and almost a third fewer than the international average and a fraction of the time that it takes in some of the fastest-growing, emerging markets around the world.
	We have to do much more especially to tackle bureaucracy that is holding businesses back. I note the point made by a number of noble Lords that this bears down particularly on SMEs. It is a continuous challenge. I suspect that if we are standing here in 10 years' time we will still be pleading for an attack on unnecessary regulatory bureaucracy on behalf of small businesses. But we are working on it. That is why we have introduced the Red Tape Challenge and are seeking to simplify planning procedures-one in, one out on red tape; and the new National Planning Policy Framework creates a presumption in favour of sustainable investment, reducing some 1,000 pages of planning guidelines to just 52.
	Secondly, I should like to comment briefly on trade. Historically, our performance has been weak. In fact, since the 1960s, trade has tended to be a drag on growth rather than a driver of growth in this economy. We also have had a burgeoning balance of payments deficit, although that seems to have stabilised in the past year or two or three. The fact, however, is that over the long term we have to find a way of paying our way in the 21st century. We have therefore set an ambitious target of doubling exports to £1 trillion by 2020, which requires growth of a little over 8% per annum compound. Last year we achieved 10.5%, so we are on track, but we have to keep that up, not merely to 2020 but beyond that. To achieve this, we need to look at where we stand in terms of market share. In most markets we lag behind Germany; in many we lag behind France, and in some we lag behind Italy too. I mention those three countries because in some ways they are our most obvious direct competitors.
	The rise of the global middle class is a huge opportunity for all of us. As the emerging markets take their place on the world stage-or, in some cases, retake their place on the world stage-what you notice is that everywhere the appetite for the sort of goods that we take for granted is exactly the same, and as strong, as ours. So the opportunities are there. But if our exports do not keep pace with the rates of growth of those emerging markets then we will fall behind the competition. Our challenge is to get more companies exporting and to increase the amount that we export outside of the European Union.
	Central to implementing this strategy is UK Trade and Investment. I would like to spend a few moments discussing how UKTI has been reorganised and refocused to meet the challenges we face. We have appointed a new chief executive and renewed the top management team, bringing in people with strong private-sector enterprise. Our UK-based trade advisers now work on incentivised contracts and so do our inward investment services.
	In overseas priority markets we have set up a new group to identify so-called high value opportunities-contracts for major infrastructure projects, whole new cities and so forth, which create opportunities so long as we showcase the British offer cohesively and effectively. This is methodical work. We have identified in particular 60 top priorities. For each one of those we have an action team led by someone from UKTI, drawing in industry representatives from the relevant sectors. In some cases they are helping consortia to form; in others they are providing a cohesive offering, in particular creating the framework within which SMEs can access these enormous project opportunities which can seem so daunting to an SME working on its own. As just one example, in Malaysia, UK firms, including some small ones, have won business designing train stations and providing engineering consultancy for the country's largest infrastructure project, worth over £10.5 billion, in mass rapid transit.
	We have also introduced best business practice by strategically managing relationships with our leading exporters and leading investors so that they no longer feel that they have to run from pillar to post when trying to deal with government. This is beginning to produce benefits, although I am confident that this is, again, something that we have to keep up over the long haul if we are really to gain the benefit of providing a cohesive presence for inward investors and large British exporters to deal with. It is showing benefits.
	Perhaps our most important task is to help more and more SMEs into the export markets. We have set a target for UKTI of doubling its client base from around 20,000 currently to 50,000, between now and 2015. Of course the vast bulk of that client base is already, and will continue to be, SMEs. We have a new team in UKTI headed by a new executive with strong personal business experience leading the charge on this. We have put in new programmes, and I am pleased to report-because this struck me almost from day one when I got into the job-that we have reversed the downward decline in trade access programme support. We have pushed the budget up this year, and if I get my way we will push it up next year too.
	We have introduced new programmes of e-connectivity designed to help SMEs talk to each other and share experiences, because there is nothing so powerful as an SME talking to another SME about the practical challenges of getting into the international markets. We have introduced a new, more flexible approach to charging for market introduction services. I believe that there was too much of a confusion of ends and means, as the budgets for selling these services became the end. No, they are a means and not the end itself: the end is to serve clients and help them get into the export markets.
	UKTI is also working much more closely with UK Export Finance, formerly known to many of us as the Export Credit Guarantee Department, which can now for the first time in 20 years offer services to companies of all sizes. For the past 20 years it has in effect been providing services only in the form of big-ticket, long-term credit guarantees for the defence and aerospace industries. We now have a range of products in place which are relevant to an SME in the smallest possible denominations.
	Moreover, we know that exporting helps companies to grow. We know that businesses that export do better with the help of UKTI and UKEF. We know that on average companies that work with UKTI go on to win overseas sales of over £100,000 within 18 months. We know that this is value for money from the point of view of the taxpayer. However, I think that it is important to stress a theme that has come through this debate already on several occasions; that is, that the Government cannot do this alone. You will no doubt hold the Government to account for the quality of the services they deliver through UKTI and UKEF and through the Foreign Office and its work through the missions and posts overseas. However, even if you scored us 10 out of 10 on all of those dimensions, it still will not be sufficient.
	There is a key role for the supporters and networks of SMEs to play as we help small companies face the often daunting challenge of getting into the export markets for the first time. I am working as closely as I can with, for example, chambers of commerce, including the British Chambers of Commerce, the Confederation of British Industry, the FSB; and also with banks, lawyers and accountants-all of whom are clearly critical to the prosperity and growth prospects of small companies-as well as with trade bodies such as the Energy Industries Council, which my noble friend Lord Jenkin mentioned and with which we do indeed co-operate on many levels, just as we do with a number of other such institutions representing industry interests and needs. The sector groups include the aerospace, defence, security and space industries; the BBA; the Law Society; and the Institute of Chartered Accountants, which I believe is playing an extremely valuable role in helping its members-who have so many SME clients-understand the opportunities.
	I have also been working with honourable Members from the other place in a cross-party initiative to encourage them to seek out businesses in their constituencies. If you divide the target that the Prime Minister set of 100,000 new companies into the export markets over the next few years by the number of constituencies in the UK, it works out as just two or three dozen businesses per constituency per year. Put like that it does not seem as daunting as the figure of 100,000. The critical point is that this is a collective effort. Again, a number of noble Lords have raised the possibility of the roles that Members of this House can play, and one or two Members have already referred to missions led by Members of this House. I would be delighted to work with any of the noble Lords in this House who have links to business groups or know particular places well, to find ways of engaging them in what I believe is a collective challenge.
	Turning to the various comments made in the extremely interesting and very wide-ranging interventions by noble Lords, I have to say that I will not have time to do justice to all of them. This was a very wide-ranging debate covering many of-essentially all-the issues in the economy today. I will attempt to focus on some of the major themes and commit to writing to noble Lords where I am not able to address particular points.
	My noble friend Lord Jenkin mentioned three things in particular. The first was the issue of the awareness of UKEF and, come to that, UKTI. There is work to be done on this. It is clear that not enough of their potential customer base knows of their services and how to get to them. We need to work hard on that. We are putting a lot of effort into this. In particular, in the case of UKEF we are appointing representatives into all of the UKTI offices around the region. I have regularly, as I mentioned, been around the regions meeting with businesses, holding events and so forth. This is continuous work and we have to keep at it.
	My noble friend also mentioned the question of life sciences, the importance of the life sciences initiative and the need to ensure that we showcase what we are seeking to do, as well as the need to get on with it- I think that that was really the thrust of the point. I resonate with the point that we need to make sure that the world beyond our shores understands what a telling proposition we have to offer. This is simply one of the best centres for life sciences development and investment anywhere in the world and we need to work to showcase that as effectively as we can. I would like to take away the thought of having some form of group of ambassadors from the industry to work with us in showcasing these opportunities. I believe that we have done that increasingly successfully in healthcare services, a related area where, for example, the noble Lord, Lord Darzi, has led both missions and a working group for us in helping us to showcase UK healthcare services more effectively.
	I will move on, if I may, to comments from other noble Lords. The noble Lord, Lord Liddle, made a number of points about the importance of skills investment and the linkage between research in the universities and commercialisation thereof. A number of other noble Lords made similar points. The role of catapults will be extremely important in this.
	The term "pea shooter" was used to suggest that we were not doing enough. This gives me the opportunity to make a general statement in response to a number of comments, including those of the noble Lord, Lord Stevenson. It would not be fair to characterise what the Government are doing as merely using a pea shooter. Extensive investments are going on, for instance in apprenticeships. The Government will spend £1.4 billion on start-ups, which this year will involve something of the order of 450,000 new apprenticeships. What we are doing was started by the previous Government and has been continued and ramped up by this one. We are rebuilding an apprenticeship system that fell into disrepair in the 1970s, 1980s and 1990s. We need to rebuild it. I will repeat something that I have said once or twice already. We must stick at this over 10 or more years before we get back to where we should be-with a skilled industrial base for this country. Along with all noble Lords in the House, I look forward to the report of the noble Lord, Lord Heseltine, on the competitiveness of the UK economy.
	A number of noble Lords raised the question of Europe. I will dwell on that for a moment or two. It is clearly the case that, whatever the uncertainties about the way forward for the eurozone, we are involved in Europe. We are a member of the European Union, 45% of our exports go to the eurozone and half of them go to the European Union. We are impacted by the European Union. It is absolutely in our interest to continue to press for full implementation of the Single Market Act. The services directive and the digital single market are areas that will make a huge difference to Europe's competitiveness globally, and to the opportunities that our companies will have in global markets. The Government are fully committed to arguing continually and loudly for Single Market Act implementation.
	I am reminded that we are running out of time. This reflects the extensive nature of the debate. We have covered many topics. I would love to have had more time to talk about energy reform and its implications, and to respond to the point of the noble Lord, Lord Paul, about the importance of getting energy policy right for industry, for consumers and for long-term security. This is a difficult and complex area. As noble Lords will know, a Bill on this is being scrutinised in the other place at present.
	In general, the message is clear. This is a collective effort. We need to work away at encouraging more companies into international markets. This is not a one-year fix. It is not a programme that we can conceive of implementing only for the lifetime of one Parliament. We will be living with this for a generation as we rebalance the economy away from excessive reliance on domestic consumption towards international engagement.
	I will make one final comment. I promise to write to noble Lords whose points I have not been able to address. The more we succeed in this, the more we will not only repair our balance of payments position but contribute to growth. Very important research shows that SMEs in particular that get into international markets enjoy very considerable productive efficiency gains quite quickly-something like 30% gains in the first year or two of taking the first steps into the international market. That goes on as they spread their wings into new markets. It leads to higher profitability, greater longevity, further job creation and, in summary, to the strengthening of the backbone of the economy.
	My final point is therefore that what we are talking about is not simply the balance of payments. It is not simply the need that we have to pay our way in the 21st century. It is about the regeneration of the economy that is core to the growth strategy that this Government have in place alongside the deficit reduction strategy and the strengthening of the macroeconomic environment.
	Finally, I thank the noble Lord, Lord Jenkin of Roding, for introducing an extremely important opportunity for us collectively to talk about an issue that is central to all of us who have concerns about this country's future economic potential.

Lord Haskel: The Minister spoke warmly of reducing corporation tax. Of course, what he forgot to say was that the Government are also reducing capital allowances by an even greater amount. What impact will that have on our competitiveness?

Lord Green of Hurstpierpoint: Corporation tax must be seen in the context of an overall tax package. We have a number of new measures in place. I referred to the patent box, whereby we will tax revenue from intellectual property at 10%. We have very generous R and D tax credits. We have introduced enterprise investment allowances. It would be very difficult to do anything other than recognise that the overall tax framework contributes to a very business-supportive tax environment. It needs to be competitive. The goalposts are moving internationally as other countries seek to create competitive tax regimes. We need constantly to watch what others are doing if we are to go on being an inward destination that foreign investors find attractive.

Lord Jenkin of Roding: My Lords, according to my calculations we have 14 minutes left before our three and a half hours run out. However, I will relieve noble Lords' anxieties by reassuring them that I do not intend to speak for anything more than a minute or two. I know that the next debate is ready to start.
	I will say three things. First, the Motion was drawn in deliberately wide terms in order to embrace not just the narrow definition of manufacturing or service industries but a whole range of industries. A number of noble Lords made maximum use of that. We heard a lot from around the country and across sectors about the importance of competitiveness. I particularly welcomed what was said, for instance, about competitiveness in our cultural exports, which are hugely important.
	Secondly, I am most grateful to noble Lords who took part in the debate. I was not sure whether we would secure a long enough list, but we did. I hugely value-and my noble friend said that the Government value-the amount of expert evidence that has come from this House in a way in which we are justified in taking some pride. We have a range of expertise here that was on show in this debate.
	Thirdly, I thank my noble friend the Minister, who demonstrated his mastery of the subject as a result of his own long experience, including his experience as a Minister, of dealing with the problems both of encouraging exports and of promoting foreign direct investment. He showed not only that he was master of his subject but that he had taken on board some of the genuine criticisms that were made about where the Government could do more to help industry and companies, particularly SMEs, make their contribution in this field. We look forward to seeing the letters that he has promised to send to all noble Lords. I thank him most warmly. As I said in my opening speech, we do not see enough of him here because he is so busy banging the drum overseas for Britain. I beg to move.
	Motion agreed.

Supply and Appropriation(Main Estimates) Bill
	 — 
	First Reading

The Bill was brought from the Commons and read a first time.

Horses: Transportation
	 — 
	Motion to Take Note

Moved By Lord Higgins
	That this House takes note of the welfare and transportation of horses in the European Union.

Lord Higgins: My Lords, I am very glad and indeed fortunate to have the opportunity to open a debate on issues related to the welfare and transportation of horses in the European Union. In doing so I should declare an interest, as my daughter is an equine veterinary surgeon. It is pleasant to introduce a debate on a European matter that does not involve reference to the eurozone and the various controversies associated with it, on which I have spoken on a number of occasions recently, but it is also true that this debate is unusual and perhaps can be summed up by a quotation in the excellent House of Lords Library note that was prepared for this occasion. Under the heading "Overview", it states:
	"There is a special relationship between most British people and horses. We do not see them as farm livestock".
	However, our views are not shared by all other countries. Indeed, EU law regards horses in the same way as farmed animals.
	Much of what we have to discuss today is concerned with how the European Union could be useful in ensuring that everything is done to make sure that animal welfare, in particular the welfare of horses, is maintained effectively. For almost a decade, I have been concerned with the suffering caused by the international trade in live horses for slaughter. As noble Lords may know, this mostly takes place between Poland and other countries in eastern Europe, Italy, and to some extent Spain. The charity World Horse Welfare has been at the forefront of campaigning on these issues.
	Ideally this trade should cease altogether so that horses are slaughtered in their country of origin and then exported frozen or in some other form as meat. That would eliminate completely the problems that I and many other noble Lords are concerned about. However, for various commercial reasons that is not likely to happen-not least, I should say in passing, so far as the trade with Italy is concerned, where the motivation for carrying on the trade as it is arises from the fact that the horses, which are imported for slaughter, are apparently then presented as fresh Italian meat. One would hope that my noble friend might consider making representations to the Italian Government with a view to stopping what is in effect a fraud being perpetrated on the people of Italy, because they are consuming the product.
	This issue has been raised in a number of different ways, in particular on the question of whether there should be an amendment to the European law on this subject. In the forefront of all these is the problem that, as evidence from World Horse Welfare and others shows, the animals are transported in the most appalling conditions that do not conform to what is set out in the regulations. Large and small horses or mares and stallions may be put together with little headroom and inadequate water for the journey that they have to undertake.
	Perhaps most important is the question of why there is no limit on journey times. Animals can be transported from Poland to the heel of Italy without any limit being imposed on the length of the journey. In response to an Oral Question tabled by the noble Lord, Lord Dear, a few days ago, my noble friend the Minister said that he would press for a change in the regulations on journey times. When he winds up the debate, perhaps he can tell us to what extent he has managed to make progress in that respect. It is the crucial matter at the moment, quite apart from the other particular issues that I have mentioned.
	The second problem is the question of enforcement. When I raised this matter in a debate held in May 2008 in the Moses Room, my understanding was that enforcement was the responsibility of local authorities. This is an international trade, so there is no reason why any local authority should be particularly concerned about how horses pass through its area. Perhaps the Minister could say whether that is still the case and, if so, whether something could not be done to put in place a more effective system of enforcement.
	All the evidence suggests that the regulations are not being enforced properly. Whatever the terms of the regulations may be, if they are not enforced they will not help the animals who are travelling in these very bad conditions. The proposal on journey times has been endorsed by the European Food Safety Authority. This has been taken into account by the Commission, but we have still not had an assurance that the regulations will be changed to deal with the recommendations put forward by that authority. No doubt negotiations will continue, but perhaps my noble friend could tell us how he sees the next stage in the campaign to try to prevent these abuses developing.
	That covers the first point about which I have been concerned for a long time. However, when the previous debate took place, and when I have raised the issue by way of Parliamentary Questions and so on, I was not fully aware of a separate set of problems that are different in nature but of equal severity. They relate to the tripartite agreement that was designed to allow the free transportation of thoroughbred and competition horses between the UK, Ireland and France without the need for health certification. This is entirely admirable because these are extremely valuable animals. I imagine that the transportations are conducted with a degree of luxury, which is in total contrast to the poor animals I referred to a moment ago. It is good that the practice should continue.
	However, as I understand it, in 2005 the agreement was extended to allow the free transportation not only of high-value horses but of horses of low value, which can now circulate around these countries unchecked and unmonitored. The market has been growing as a result of the overbreeding of horses both in the UK and on the continent. Animal welfare charities are aware of cases where these horses are being moved from place to place, including into and out of the UK, with no official record of those movements, making them virtually untraceable and rendering any disease control measures difficult. Apparently the European Union law on routine port inspections of horses entering and leaving the UK allows for regular checks only in exceptional circumstances. These horses are now going in and out with no checks being made for diseases.
	This is an extremely dangerous situation. We are all aware of the case in 2010 of a horse being imported into this country from Romania, where there was an outbreak of equine infectious anaemia. It is a notifiable disease and the animal was slaughtered in due course. If the tripartite agreement is not amended so that it reverts to its original form, there is a serious risk that infection will enter this country and spread through our livestock, resulting in horses having to be slaughtered-no doubt to the great distress of their owners.
	This is something that should be preventable. I would be glad to know whether my noble friend has taken the point fully on board, and I will seek to negotiate the tripartite agreement, maintaining its original intention while ensuring that the risk of disease spreading to this country from elsewhere in the European Union is reduced. For example, imports can come in from France although the horses concerned might have originated somewhere in eastern Europe, where there are disease problems. I know that the Minister is sympathetic to all these arguments and I hope that he will be able to take positive action on the issue.
	I believe that both the previous and present Governments are sympathetic to these arguments, so I hope that we can encourage the Government to take positive action and to press forward in negotiations in the European Union to protect the position of horses. This relates both to the very bad conditions in which those unfortunate animals are being shipped around the UK-my noble friend referred to it the other day as a disgusting trade-and to taking adequate steps to ensure that there is no spread of disease that would have very serious implications for the UK trade generally, which I gather amounts to some £3 billion. We are fortunate to have this debate and I am glad to see that a number of noble Lords are taking part. I hope this will lead to further progress in dealing with these problems, which are important for the economy of the country as well as of concern to anyone with an interest in animal welfare. I beg to move.

Baroness Mallalieu: My Lords, I first declare a personal interest as the president of the Horse Trust and the chairman of the All-Party Group for the Horse. I am also a member of the Humane Slaughter Association. Secondly, and most importantly, I thank and congratulate the noble Lord, Lord Higgins, on securing this debate which is particularly timely in relation to the Commission, for reasons I will come to.
	At the age of 11, I came across a leaflet written by Ada Cole, the remarkable woman who founded the charity which is now called World Horse Welfare. It was about the export of live horses from Ireland, taken by sea for slaughter on the continent. There was one photograph which I can still remember in every detail. It was of a carthorse with a kind eye and a crooked white blaze, barely able to lift its head from the position in which it had collapsed on the dockside in Antwerp. It looked totally exhausted and a picture of misery. After, no doubt, a lifetime of work, its last days should not have been spent at sea in terrible conditions. The caption beneath that picture, which I have never forgotten to this day read, "A victim of man's greed".
	That terrible trade in old and unwanted horses from Ireland to France and Belgium by sea has gone. It was killed, in part, by public outcry when, on one occasion, some 12 dead horses, which had collapsed during the journey and been thrown overboard, were washed up on a genteel English seaside beach. The fact remains that, after 50 years of so-called progress, some 65,000 horses still make long, gruelling and almost wholly unnecessary journeys to their death within the European Union each year, with the sanction of the Commission which is frightened of restraining trade. About 15 years ago, we had a debate on this subject and I can still remember one speech from that evening. It was made by Lord Slynn of Hadley, no longer with us, who described his own experience of stopping at a continental motorway service station and looking through the vents of a huge lorry standing in the car park. It was crammed with horses, some visibly injured, all utterly exhausted, standing in total silence. They had, he found, been on the lorry like that for two days and had two more to go before arriving at their eventual destination for slaughter in southern Italy.
	There has been progress, but it has been painfully slow and inadequate to prevent what is a wholly unnecessary suffering. I have recently visited Transylvania-part of Romania-where tractors are still a rarity and the work is done, as it was 150 years ago, by horse-drawn vehicles. The population of working horses in eastern Europe is still huge yet, despite the fact that no horse there is more than 12 hours from an abattoir in which it could end its days after its working life finishes, many will instead make a journey of two to four days to Italy and Spain in vehicles which are, as the noble Lord, Lord Higgins, said, far removed from the sleek racehorse transporters which we see on our motorways. Those horses are overcrowded, sometimes quite unfit to travel and with wholly inadequate checks made to monitor journey times and rest periods or on whether water is actually provided. Ironically, the comparative cost of slaughter near the point of origin and refrigerated transported is, I am told, very little different from the cost of transporting these animals across a continent in these conditions. The majority of the meat is processed in any event, so arguments about consumers demanding fresh meat are largely irrelevant. In reality, the trade continues in this way because that is how it has been historically and because the Commission lacks the willpower to deal with it.
	I cannot help but feel that, if the public in Spain and Italy had the same degree of awareness of what is involved as people in this country, 1 million of whom signed a petition to limit journey times, then demand would drop. This would bring changes more quickly than anything else. There is still no overall limit on the duration of those journeys, despite the recommendation of the European Food Safety Authority, whose research has shown that above all other species-and there are differences between species-horses suffer severe welfare problems in journeys over that time. Our MEPs have shown their support, the European Parliament has supported the change, yet still-and inexplicably-the Commission so far prefers to go down the line of guidance and enforcement of existing regulations, which are currently not adequately enforced.
	We are moving into the Cypriot presidency during which, I suspect, this issue will have very little priority. However, I understand that Ireland takes over immediately after that and I very much hope we will then see adopted the proposal to reduce the journey time for horses to 12 hours, at the very longest. I hope that the Minister can assure us that pressure will be stepped up. I should like to pay tribute to the Minister, Jim Paice, who on 15 June released an intervention calling for the introduction of that limit, as recommended by the EFSA, and it was accepted by the Council of Europe.
	The long journeys from eastern to southern Europe are not, however, the only disturbing feature of what is going in relation to horse transport in Europe. For different reasons, we should all be concerned about the shipments of surplus horses, mostly of very low value, currently taking place between Ireland, France and the United Kingdom. During last year, the provision of abattoirs in Northern Ireland was insufficient to meet the demand for the slaughter of unwanted horses that were, having been bought by UK meat dealers, sometimes waiting for up to six weeks in unsatisfactory conditions before there was the capacity to ship them to England for slaughter. The Horse Trust and other charities did what they could to assist the very limited provision of equine welfare over there, but the volume of abandoned and malnourished welfare cases, which is a combination of the recession and chronic overbreeding, means that humane slaughter on the spot was often the only option.
	Low-value horses come every week to the UK from Ireland and France, and go out again. They are not routinely checked at ports of entry and, on occasions, are unfit to travel, or they introduce disease, as the noble Lord, Lord Higgins, pointed out. What on earth was the horse that brought the disease coming here from Romania for? Given that African horse is sickness knocking on our door-with its potentially disastrous consequences for our £3.8 billion equine industry, should it reach us-it is a state of affairs that should worry us all, and every Government.
	What this international trade is all about is unclear. There are meat dealers in this country who own literally hundreds of horses of little value, and many of those horses were in a very poor state last winter. It is on a scale that has the equine charities and local authorities that have to deal with the consequences of abandoned horses, fly grazing, welfare cases and escapees, tearing their hair out. These dealers treat the horses as commodities to be sold on, if and when there is a market, but most are poor specimens of little value and no use, save perhaps for meat at some future point. They are the result of indiscriminate breeding, both here and in Ireland. In time of economic difficulty, the numbers are such that all the rescue organisations put together could not begin to take even the worst cases. I have heard reports of local authorities and, indeed, major charities considering that their budgets would not stretch to prosecuting even the worst offenders.
	Somehow, people have to be educated, here and in Ireland, not to breed horses unless they have a job for them-and then only to breed from the best-and when they reach the end of the road to do the right thing and put them down at home, not sell them on to the dealer who promises to find a good retirement home. These are the horses that end up on a transporter, being shipped hither and thither to an uncertain end.
	What needs to be done right now? The Commission needs to pressed, as it already has been by our Ministers, and pressed and pressed again, until it implements the 12-hour limit. Better guidance and inspections en route, which have been accepted by the Commission, must be implemented. Consumers must be told how the meat has reached their plates in Italy, Spain and parts of France. That is something that I understand World Horse Welfare proposes to do. Horses should bee seen and treated as sentient beings, not mere market commodities. If they are to be eaten at the end, so be it; but it is surely our duty to ensure that in life they are treated with respect and consideration, as should be all our food animals. Despite all the advances and all the talk over the course of my lifetime, too many horses remain the victims of man's greed.

Baroness Verma: My Lords, I remind noble Lords that this is a time-limited debate and when the clock shows "10", the 10 minutes are up.

Lord Addington: My Lords, this is one of those debates when you realise that you have jumped into very deep water, so I shall not be paddling far from the banks of my knowledge, which is not extensive. Most of the points that I thought might add to the debate have already been covered by the noble Baroness, Lady Mallalieu. Primarily, the enforcement of good welfare in our nation seems to have been driven by public opinion. If other nations and other bodies, primarily in the EU, wish to drive this on, we must do something to engage public opinion within those nations.
	I am assuming that even if we are slightly overly sentimental about horses, other nations do not deliberately go out to hurt them. Most people are not naturally cruel. When animals are transported either for the table or for recreational reasons, they should be treated with dignity. As has been pointed out, there could be bureaucratic reasons behind the economic benefit of transporting a horse for a long period of time. A live animal is probably going to be heavier than the meat of a slaughtered animal and I do not know how that stands with fuel prices, etc. However, if there is a bureaucratic reason, and the meat can be called a product of Italy because it has been slaughtered and finished there, surely there should be some encouragement for consumers in Italy to have an advantage and not be ripped off like this? Can we make sure that the EU project acts together to defend all the consumers of the EU? That would also benefit animal welfare.
	Unless we can bring this to the attention of the public across Europe, progress will be painfully slow. Unless we can enforce regulations and guidance about rest periods, feeding and watering, and make sure that national enforcement agencies regard it as a priority, with people shamed and punished when they break the rules, very little is likely to happen. All nations are full of laws which are a low priority for the authorities. What we have to do is draw this to the attention of the bodies within the countries concerned and encourage them to act. The question for our Government is how do we encourage this? How do we encourage those bodies here and in other nations, such as Ireland, where there is a well-developed respect for the horse, to come together with a Europe-wide message? This will mean that local authorities will have an interest, an advantage and a benefit in taking action. We should never lose sight of the law of self-interest. Unless we can convince our fellow members of the EU that there is something to be gained, very little will be done.
	So we have the consumer argument, the welfare argument and there is a political advantage. Am I the only person here who has felt that occasionally it would be the right thing to do, and politically advantageous to raise that point? I do not think so. If we act, we will have a chance of applying some levers to the process. If we merely stand back and say it is a bureaucratic process that should be left alone, nothing is going to change. We must get out and make sure that people understand the problem. The noble Lord, Lord Higgins, has taken a vital step here. We must engage with those outside, and the Government can help by approving this process. It does not have to be active support in the Council of Ministers, though that may be a good thing; it could mean encouraging our public bodies to spread the message wider. That would probably be more beneficial and will lead to quicker results. I hope that the Minister can tell me that this process of building awareness across the whole of Europe is taking place.
	My final point is about the tripartite agreement and the movement of animals for leisure purposes. I live in the village of Lambourn, in the valley of the racehorse in Berkshire. I can assure your Lordships that if there was a big problem with the economic movement of racehorses around the country, I would have heard about it, and at the moment I have not heard anything. For anybody who is not familiar with the village of Lambourn, two people out of three are involved in racing. There are not many places where, if you go for a walk in a morning, you have to avoid strings of racehorses on either side of the road going between gallops. I have not heard much about this being a problem, so presumably the racing position is that people are comfortable with it. As for the use of other horses, again I have not heard of problems, but would the Minister look at the danger of disease spreading in? This very valuable industry employing a lot of people deserves protection. Would he assure me that the Government are looking at whether liberalisation has not gone a step too far and is endangering this golden goose?

Baroness Trumpington: My Lords, I am very grateful to my noble friend Lord Higgins for introducing this debate. Apart from the grim reality of the subject before us, it makes a change that this matter is totally politics free and we can say what we darned well like. In pursuit of that, I pay tribute to the noble Baroness, Lady Mallalieu. For many years, she has loved and protected the horse publicly and privately, including through her chairmanship of the All-Party Parliamentary Group for the Horse, which she mentioned. I thank her for all that she has done and all that she will do in the future.
	I said recently at Question Time that I had tried to do something about this disgusting trade but without success. I know that it is not much to talk about, but I was a steward at Folkestone racecourse for 10 years, and I know Lambourn, mentioned by the noble Lord, Lord Addington, and Newmarket very well. The economic situation of a country affects the horse trade as well as everything else to do with the countryside and nature. I do not believe that Lambourn is as peaceful and happy as perhaps the noble Lord thought it was.
	I have two requests to make of the Minister. The first is perhaps unusual. Could he persuade the press to display existing photographs of doomed horses in transit together with as much publicity as possible? I do not believe that the public are aware of this situation, and only the press can help. I believe that photographs exist which would horrify people. Secondly, will the Minister explain-I have written to him-why in Italy and Germany horses are transported live instead of being killed, frozen, cooked and then turned into the sausages so beloved?
	I await the answers to my two questions. I realise that the first is somewhat unfair, but I am darned if I cannot try to get all the publicity that I can for this matter. I am sure that noble Lords in this House will agree with me.

Lord Dear: My Lords, this debate, which I warmly welcome, follows hard on the heels of a Question that I had the privilege of putting before this House on 14 June, when I tried to concentrate on the transportation of horses. The noble Lord, Lord Higgins, to whom I am very grateful for securing this debate, has already addressed that issue in some depth.
	Perhaps I might add to what has been said one or two statistics which have been gleaned by the World Horse Welfare charity, of which-I declare an interest- I am a trustee. Examinations by World Horse Welfare of horses leaving Romania en route to Italy showed that 14% were deemed unfit for that journey at the point of departure. By the time they had arrived in Romania, 37% were deemed unfit to have been transported. A separate tranche of investigations by World Horse Welfare, again in Romania, indicated that of horses transported on that terrible route from Romania to Italy a quarter were showing at the point of arrival in Italy acute injury which had been inflicted or suffered during that journey.
	Other evidence on the transportation route might also interest your Lordships. Anyone who knows anything about horses will recognise that an abnormal stance, or weight-shifting, in a horse indicates pain. Behavioural data from one randomly selected shipment two years ago showed that 94% of horses arriving at the point of reception had an abnormal stance and that 83% were weight-shifting. I shall not labour the point because it has already been made, but those statistics might well be of interest to those who read this debate later in Hansard or elsewhere.
	The point is that the trade and transportation of horses across Europe is in a mess. I want to concentrate briefly not so much on the transportation issues which have already been very well illuminated by speakers before me but on the tripartite agreement which bears very much on the situation in this country. I will be going over information that has already been given to the House but I will do it in slightly more detail to make sure that the point is not lost. The tripartite agreement was entered into between three countries-the United Kingdom, France and Ireland-to facilitate the trade of high-quality horses, usually race horses but sometimes eventers and show-jumpers, between those three countries. Other countries in Europe would have a stake and a claim to say that they, too, are involved in high-quality horses but we all know that the majority of the racing industry is centred in those three countries, hence the agreement called the tripartite. It was originally intended to allow for the free movement of registered horses-racehorses and others-between those three countries without the need for a health certificate.
	In 2005, as we have already been told, the agreement was extended to include all horses being shipped backwards and forwards between those three countries, other than those that were being transported for slaughter. What we now have is the completely unchecked and unmonitored movement of often low-value horses into and out of the UK from France and the Republic of Ireland. I venture to suggest that the problem is probably greater emanating from France, but it is also there in those that come from Ireland. Animals can enter France, as we already know, from anywhere in the EU. They can remain in France for a long or a short time-often for a very short time indeed-and they can then enter the UK unchecked under the original tripartite agreement and no one will know where they have come from or the premises from which they have been moved.
	We know that welfare is compromised through this trade because many of these animals, as I have said, are low-value-they are vulnerable horses, ponies and sometimes donkeys-and the transportation, as we have explored in depth, is often quite horrendous. But because they pass from dealer to dealer with no check at all, mixing with other frequently low-value animals, they are constantly exposed to the risk of disease. We already know from the agricultural industry how bluetongue and Schmallenbergvirus can affect sheep. We have already heard mentioned in this debate that African horse sickness has reared its head to a tremendous extent in Romania. Romania keeps cropping up in this debate and I really think that the Commission should pay particular attention to that country. In 2010 we had our first outbreak of equine infectious anaemia, EIA. That, too, was traced back to Romania and now, without any pun being intended, the stable doors are being locked there to some extent because restrictions are in place around that country.
	The potential spread of disease across borders into this country will affect a UK equine industry which is pushing close to £4 billion a year. It is going to be seriously compromised unless we go back to the original demands and intentions of the tripartite agreement. The information that I have from World Horse Welfare is that there is no reason whatever why we should not revert to the terms of the original agreement. That can be done, I am confidently informed, without undue deference or discussion with the other two countries. As understand it, we simply go back and insist that the terms of the tripartite agreement are adhered to as they were before 2005. Without flogging this particular horse to death-again, no pun intended-I urge the Minister to look closely at the tripartite agreement, what it was intended to deal with in the first place and the tremendous amount of risk that we are now exposed to because of the position now being adopted, and to report back to the House as soon as he can on whether he has been able to ameliorate that position.

The Earl of Caithness: My Lords, I congratulate my noble friend Lord Higgins on finding time for this debate. Although it is focused on horses, your Lordships will know that the EU regulations on horses also cover other vertebrates, and I am sure that the House would not want to give the impression that it is not concerned about other vertebrates.
	I have the honour to serve on Sub-Committee D, and we have been keeping an eagle eye on the transportation of livestock which are subject to EU regulations. The picture, as has been described, is pretty depressing. There was no doubt that the Danish presidency tried hard, with its five working parties, to get some agreement in the EU, but the EU is hopelessly riven. It is clear that it is completely split between those who want some reform, those who want no reform, and it is equally split among those who want some reform. As your Lordships will know, trying to get anything done in the EU when there is not cohesive agreement is almost impossible.
	Therefore, I have huge sympathy for my noble friend on the Front Bench, because although we know what is right, if we do not have the support of the majority of the other member states-as we clearly do not-we can never achieve the high welfare standards necessary. Here, I have to be a little practical. Is the ambition of the highest possible standards to be the enemy of the good? Should not be UK be taking, not the highest position, which is what we might like to get to, but, to get a majority in the EU for change, ought we to drop the level of what we are trying to achieve? I know that the Government have been very keen to focus on the young stock that have been travelling. That is hugely important, and the committee supported the Government on that but, overall, if we are to make progress-with a future presidency, we might-perhaps we ought not to try to achieve the ultimate but to work to get a majority.
	The EU regulations refer to,
	"vertebrate animals transported in connection with an economic activity".
	Does my noble friend have any information on what animals are transported in what is not an economic activity? That might be useful to know. The EU prepared a paper in November. In one paragraph, which is a comparison of the quality of animal welfare during transport before and after the application of the regulation, it claims that,
	"animal transport on long journeys has improved",
	but qualifies that by saying that,
	"no firm conclusions can be established".
	How can the EU Commission possibly say that if there is no firm evidence? It is very good to give yourself a pat on the back, but that if there is no evidence to do so, you had better be a bit careful.
	Turning to the use of navigation systems, again, there has been poor implementation. The use of navigation systems raises a question that runs through the Commission paper: the interpretation of existing regulations varies from member state to member state. Why is there a lack of clarity in the EU regulations? Surely that is a fundamental starting place so that one can get a wording that every country is bound by-they may not agree it, but they are bound by it-because only then can the Commission start to exercise what authority it has.
	As has been said, the level of compliance and enforcement is up to each member state, but if there is a variation of interpretation of the regulations and some member states are therefore not complying and enforcing in the way that we do, any statistics are meaningless. You would not be comparing similar things. The basic need is for clarity in the regulations and then we must then ask the EU to make certain that compliance and enforcement are the same throughout every member state.
	When it comes to penalties and sanctions, the Commission also says that it is very difficult to get a comparison between the countries, because of the various legal systems and because of the available data. It goes on to say that it considers this to be an unsatisfactory situation,
	"and encouraged Member States to provide for more harmonised application of the rules ... 'taking into account the limits of the competence that Member States and the legislators have decided to give to the Commission'".
	I am certainly not one who wishes to give more powers to the Commission-I think it has too many already, as your Lordships will have heard me say on many occasions-but perhaps this is one area where I might back off a little. Can my noble friend tell me whether the Commission is right in putting the blame back on to the member states or does he think that the Commission is not fulfilling the tasks that have already been allotted to it?
	This is a very sad subject to have to debate yet again. We should not be doing it but it is clear that there is such diversity of opinion throughout the member states. This Government have done so much, as indeed did the previous Government who also got support from Sub-Committee D. Perhaps my noble friend on the Front Bench can give us some idea of how the Government see this being tackled in the future.

Lord Knight of Weymouth: My Lords, as my noble friend Lady Mallalieu said in her authoritative speech, this is a timely debate because we finally have the opportunity to make some good progress on this important issue. I am delighted to join not only the consensus in congratulating the noble Lord, Lord Higgins, on his opening of the debate but the consensus that seems to be emerging, even from the noble Earl, Lord Caithness, in favour of stronger EU regulation, if only on this particular issue.
	I speak as a former Minister for the horse. When I was leafing back through the 2005 strategy that we produced at that time in Defra, I found that some of the stats were worth repeating to show the importance of the horse industry to this country. It had a gross output in 2005 of around £3.4 billion; it employed up to 250,000 people directly and indirectly; 2.5 million people ride in this country; and 11 million people have some interest in the horse industry, 5 million of them having an active interest. The horse population was then certainly at least 600,000 and could total nearly 1 million horses.
	Although it is largely left to my wife, I, too, am a horse owner and I would certainly endorse the view that has been put by so many of your Lordships about the remarkable nature of these animals. That nature has of course been celebrated very successfully, first in the novel War Horse by Michael Morpurgo, then in the wonderful stage adaptation and then in the slightly less wonderful but certainly watchable movie of the same name. I am also a patron of a charity called TheHorseCourse, which is doing innovative work with horses in prisons by using one of the remarkable features of these animals: they provide instant feedback to people because of their nature-they are both pack and prey animals. That is proving extremely effective for some of the more difficult offenders, particularly young offenders. I have seen that work at Portland young offender institution.
	As the noble Lord, Lord Higgins, said in repeating the excellent Library note from, I think, 2008, we are a nation of horse lovers: hence our concern about transportation and welfare within the EU. This country's affection for the horse is reflected in the Animal Welfare Act 2006 and especially in the five freedoms that we gave all animals in that Act: a need for a suitable environment; a need for a suitable diet; a need to be able to exhibit normal behaviour patterns; a need to be housed with, or apart from, other animals; and a need to be protected from pain, suffering, injury and disease. We have heard graphically from speakers in this debate how horses are being denied those freedoms in the way in which some of them are being transported around the European Union.
	Unfortunately this tradition in our culture is not uniform across EU member states, although I agree with those who say that it is not that citizens of other states want to be cruel; it is just that the culture is different. I am pleased that our tradition is now to some extent reflected in the 1997 revision of the treaty of Rome that happened in the Amsterdam treaty. The wording was changed to:
	"Desiring to ensure improved protection and respect for the welfare of animals as sentient beings"-
	the first time that animals were recognised as sentient beings in the treaty of Rome. This was then strengthened in the Lisbon treaty, which says:
	"In formulating and implementing the Union's agriculture, fisheries, transport, internal market, research and technological development and space policies, the Union and the Member States shall, since animals are sentient beings, pay full regard to the welfare requirements of animals".
	That is a very important context for legislation and action by the Commission and member states on horse welfare and for concerns about the lack of consistent implementation of current regulations. As a result of those treaty changes, these are now fundamental animal welfare obligations on member states for which the Commission should be held to account. It should in turn be held to account on how it is using its powers to pursue member states that allow the unnecessary suffering of horses that are being transported unnecessary and inhumanely long distances. I am pleased that the Commission is currently focusing its efforts on enforcing the existing regulation and on guidance on its implementation. However, I agree with World Horse Welfare when it says that:
	"Enforcement of any legislation is essential and there are certainly areas where guidance could have a positive impact. However, enforcement and guidance alone cannot address the key problem of journey times, which do not reflect current scientific knowledge about the impact of long journeys on horses, and other serious issues such as minimum space allowances which should be increased and vehicle standards, which are in need of improvement".
	We need a maximum journey of 12 hours at the very extreme, and ideally lower; and we need an enforceable regime, as transportation crosses borders so easily. Surely in these days of GPS tracking and other recording technology in vehicles, it must be possible to ensure manageable enforcement across the European Union.
	I join my noble friend in congratulating the Government on pressing the Commission on this issue through their intervention last month, and am pleased to see the Council now agreeing to encourage the Commission to act. I look forward to the Minister's update on the Commission's response and would gently say to the noble Earl, Lord Caithness, that we should push for what we want, even if inevitably negotiation means that we have to give ground in achieving our ambition. However, I accept from his hand gesture that you can argue that one both ways; it is six of one and half a dozen of the other.
	I also look forward to the Minister's response on the tripartite agreement, which all speakers have mentioned and which was examined in particular detail by the noble Lord, Lord Dear. I support his call for the Government to look at this a little more and to come back to us with an update if they need to. I also support what the noble Baroness, Lady Trumpington, said about getting more publicity if the Government's obviously legendary spin machine can do anything to raise the profile of this, around which there is considerable public interest.
	This is an important issue. The UK has a proud international reputation as a world leader on animal welfare and conservation. I hope that the Government can continue to influence progress on this issue. On that they will have our full support.

Lord De Mauley: My Lords, in view of my own strong feelings in this area, I particularly thank my noble friend Lord Higgins for initiating debate and all noble Lords for participating today. I have a personal relationship with horses that goes back to my childhood. I have ridden under rules and we almost always have horses on the farm at home. My wife and mother are both members of equine welfare organisations and I am president of SPANA, the charity that concerns itself with the welfare of equids in developing countries, so this is a subject I feel strongly about. I applaud the work of World Horse Welfare and the Horse Trust, to which noble Lords have referred today, as well as other laudable organisations working in this field.
	As my noble friend Lord Higgins said, there is a special relationship between the British public and horses, and I share the view of those who want to see the best possible welfare standards applied to all equines, both in this country and abroad. However, we have to acknowledge, as did the noble Lord, Lord Knight, that our views are not necessarily shared by all EU countries, many of which regard equines simply as farmed animals. The Government want to see the highest welfare standards for all animals but, to enable us to make the strongest case to those who do not share our views, these standards, particularly in relation to journey times, must be based on the best scientific evidence available. We would prefer to see a trade in meat and meat products or germ plasm rather than a trade in live animals and that animals are slaughtered as close as is practicable to their point of production. But the export of live animals for slaughter, however repugnant we may find it, is a legal trade.
	During the peak of live exports 20 or so years ago, the Government and many local and port authorities were thwarted legally when they sought either to ban or curtail this trade. However, the fact that the trade is legal does not mean that we cannot insist that the highest welfare standards, backed up by the available scientific evidence, are applied to it without exception. That is why we have been pressing, are pressing and will continue to press the EU Commission to adopt the recommendation from the European Food Safety Agency that horses going to slaughter should face journeys of no more than 12 hours duration. That would be a significant improvement on the current rules, which allow journeys of up to 24 hours.
	At the EU Council meeting on 18 June my right honourable friend Jim Paice, Minister of State for Agriculture and Farming, expressed the Government's strong disappointment that the EU Commission was not intending to implement the EFSA recommendation on horses going to slaughter. We will continue to push hard for the adoption of the EFSA recommendation at the earliest possible opportunity. What we cannot, unfortunately, do is act unilaterally in an area already covered by directly applicable EU welfare and trade rules.
	The current EU legislation on welfare during transport, EU Council Regulation 1/2005, has been in place for more than five years. The Commission's recent review of the impact of the legislation noted that, while the welfare of animals during transport has benefited overall, significant problems still persist, particularly in relation to enforcement. We want to see the Food and Veterinary Office of the EU Commission taking a robust line against those member states that, five years on, have failed adequately to implement the welfare during transport legislation. We want to see the journey times for all animals, especially but not only those going to slaughter, reviewed to determine whether the current journey time rules are in line with existing and emerging scientific evidence.
	In this debate we have mainly been talking about horses, but my noble friend Lord Caithness mentioned other species. We also want, for example, to see a discussion on better protection for infant livestock such as calves. We do not believe that it is right that unweaned calves should face extremely long journeys, sometimes from one end of the Community to the other. Our own research suggests-the noble Lord, Lord Knight, referred to this-that the quality of the transport and the competence of the driver, for example, are as important factors as the overall journey time experienced by livestock.
	My noble friend Lord Higgins asked about enforcement and suggested that it was unsatisfactory that this should be entirely in the hands of local authorities. The Animal Health and Veterinary Laboratories Agency and local authorities are responsible for regulation and enforcement action. They inspect livestock transportation on the basis of an assessment of risk and additionally they will investigate claims of illegality or poor transport practices impacting on the welfare of animals. Their inspectors are active at major ports inspecting both imports and exports of horses. They may also inspect horses at the point of loading where they have prior intelligence that there may be welfare concerns. I can tell your Lordships that a successful prosecution involving the export of horses has concluded in Essex in the past few days.
	My noble friend pointed to the trade between Poland and Italy and/or Spain. I am grateful to him and to my noble friend Lady Trumpington for calling my attention to a very similar trade between Poland and Germany. These are specific examples of the international trade in horses for slaughter, which is a cause for grave concern. I have looked into it-there was, indeed, a recent TV programme about it-and it looks very much as if my noble friends are tragically right. I have drawn this to the attention of my colleagues at the department and I shall return to the issue in a moment.
	My noble friends Lord Higgins and Lord Addington and the noble Lord, Lord Dear, asked whether we will be reviewing the tripartite agreement. Defra has reviewed the risk of importing exotic equine diseases and whether the TPA needs to be amended to mitigate any increased risk. Officials have presented preliminary findings to the Chief Veterinary Officer and to the Animal Health and Welfare Board for England. Following consideration of the AHWBE's views, proposals will be presented to my right honourable friend the Minister of State, Mr Paice, for consideration.
	The noble Baroness, Lady Mallalieu, referred to an increase in the number of unwanted horses as a result of the economic downturn and my noble friend Lady Trumpington also referred to the impact of the economic downturn. I have no doubt that current financial pressure is impacting across all sections of industry. Reported welfare problems include increased dumping of horses and passing horses to rescue centres as they are too expensive to keep. This is directly related to the price of feed. There are also seasonal factors in the reporting of welfare cases: not unnaturally, reports tend to increase during the winter months. Defra remains supportive of the equine industry's contribution to the economy. The recently created health and welfare strategy group, the equine sector council, will play a valuable role in co-ordinating the views and concerns of the different welfare organisations involved in horse welfare.
	The noble Baroness, Lady Mallalieu, my noble friends Lord Addington and Lady Trumpington and, I think, others referred to the importance of public awareness and publicity generally to our case. The EU's welfare strategy for 2012-15, published earlier this year, stresses the importance of raising public awareness on animal welfare issues. The EU Council has agreed with the Commission about the relevance of communicating to children, young adults and the public at large awareness of the need for respect for animals and promoting responsible ownership. We will be asking the Commission how it intends to take this work forward in future bilateral meetings with it on implementation of its strategy.
	I understand that some international welfare organisations have had some success, specifically in targeting major retail chains in France and Belgium and persuading them to stop selling horsemeat from Mexico and Brazil due to the appalling conditions there. Unfortunately-I have been in communication with my noble friend Lady Trumpington on this-this appears to have resulted in a transfer of the source to Argentina, where welfare conditions are, I am afraid, little better. However, it does demonstrate the value of public opinion in Europe and the value of the work of welfare organisations. Of course, this debate is also helping to give airtime to this important subject.
	My noble friend Lord Caithness said rightly that member states are deeply divided on the legislation and whether improvements should be made to it. It is true that a small majority supports the decision by the Commission not to press ahead with changes at the present time. We do not agree and want to see the EFSA recommendations introduced. We are not prepared to give up and I do not believe that we are alone.
	My noble friend Lord Caithness and the noble Lord, Lord Knight, referred to the European Commission's November 2011 report on its review of regulation- I do not know whether they referred specifically to it but they referred to its contents-which highlights severe animal welfare problems during transport persisting. They are right. Reports submitted to the Food and Veterinary Office on its inspections of individual member states demonstrate that the level of enforcement of the legislation indeed varies significantly between them. The European Commission's proposed solution to these problems involves adopting new implementing rules concerning satellite tracking systems, an increase in the number of inspections to improve existing controls, better reporting on compliance by member states, increased co-operation and communication between the competent authorities and NGOs and the dissemination of Commission guidance on the interpretation of the regulation and development of guides to good practice.
	It remains to be seen how far the Commission will go. Like the noble Lord, Lord Knight, I have some doubt about the value of non-binding guides. However, at least it is actively working on a solution, and we will continue to monitor this and bring pressure to bear.
	In conclusion, we care a great deal about the welfare of all equines-indeed, all animals. We acknowledge the work that the many equine welfare organisations do in caring for abandoned and badly treated animals, and the campaigns that they run to highlight welfare issues and concerns. We owe it to them-as well as, of course, to the animals themselves-to make sure that we do as much as possible at the international level to promote horse welfare. Nearer to home, we look forward to working with the recently formed equine sector council, which we hope will be a fresh and strong voice for the equine sector as a whole.

Lord Higgins: My Lords, I did not notice what time the debate started, so I am not sure whether I am going to be cut off in full flow. I do not propose to detain the House for more than a few moments. I was very fortunate to be able to obtain time for the debate and I am most grateful to all those who contributed, many of them with more expertise and long-standing involvement in these problems than I.
	It has been an extremely helpful debate. We are fortunate in having a Minister who clearly has his heart in the right place on this issue. It is very much a question of our encouraging HMG and, in turn, HMG persisting in their efforts within the European Community. I will read again with interest what my noble friend said about inspection of this trade en route. It is not my impression from the evidence that has been produced that the situation is quite as good as he seemed to suggest, even though it may be as far as this country is concerned. We urge him to do all that he can within the complex negotiations in Europe and particularly to give priority to the question of journey times, which is crucial and could perhaps be facilitated by the use of more technology in monitoring what is actually going on.
	On the tripartite agreement, it seems astonishing that the original agreement was extended in the way in which it has been. As the noble Lord, Lord Dear, pointed out, all one has to do is to go back to the original intention of that agreement. There is no great drafting problem with that; we simply revert to the original intention. I very much hope that my noble friend will consult the tripartite group to ensure that the other two will agree to go back to the original proposal. It would be a serious risk to the whole equine industry and, indeed, to many horse lovers-not least youngsters in this country-if we were suddenly to find that there was an outbreak of disease which involved the need to cull a large number of horses. I hope that my noble friend will see what he can do within Europe and with the other two signatories to the tripartite agreement.
	I am most grateful to all those who have taken part in the debate and to the Minister for his response. We shall continue to encourage him to do all he can to further the needs of the people involved with this trade and horse lovers generally.
	Motion agreed.

Army 2020
	 — 
	Statement

Lord Astor of Hever: First, I am sure the House will wish to join me in paying tribute to the aircrew from 15 Reserve Squadron, based at RAF Lossiemouth, who were involved in the Tornado GR4 aircraft incident on Tuesday-Flight Lieutenant Hywel Poole, who was killed, and Squadron Leader Samuel Bailey and Flight Lieutenant Adam Sanders, who are still missing and must be presumed dead. My thoughts, and I am sure those of the entire House, are with their loved ones at this difficult time and with the fourth member of the squadron involved in the incident, who is currently in a serious but stable condition in hospital.
	In addition, I am sure the whole House will also wish to join me in offering sincere condolences to the families and friends of guardsman Apete Tuisovurua and guardsman Craig Roderick of the 1st Battalion Welsh Guards, and Warrant Officer Class 2 of the Royal Corps of Signals, who were killed on operations in Afghanistan recently. My thoughts are also with the wounded, and I pay tribute to the courage and fortitude with which they face their rehabilitation.
	The Statement is as follows.
	"With permission, Mr Speaker, I wish to make a Statement about the future structure of the British Army.
	I know that I speak for the whole House in expressing our gratitude for the superbly professional job our Armed Forces are doing in Afghanistan and around the world and in paying tribute to their courage, commitment and self-sacrifice in doing it. We have seen again this week, in all too stark contrast, the risks they take on our behalf, both in Afghanistan and at home, and the price that all too many of them pay.
	The operation in Afghanistan remains the MoD's top priority, but our combat role in Afghanistan is coming to an end, and with it, the predictability of the Army's main effort. Looking beyond 2014, we need to restructure to face an increasingly uncertain world, ready to intervene wherever and whenever to protect our national interest and with an ability to project force and prevent conflict through "agile and adaptable" Armed Forces, as set out in the 2010 strategic defence and security review.
	We also need to address the reality of the fiscal situation and ensure our Armed Forces are sustainable and affordable. My predecessor, my right honourable friend the Member for North Somerset, announced to the House last July that, as part of the measures to bring the defence budget back into balance and to eliminate the £38 billion black hole we inherited from the last Government, the future strength of the Army would be around 120,000, including an integrated trained reserve of 30,000-a total trained strength not dissimilar to the pre-SDSR level.
	So this Statement is not about the size of the Army; that decision has already been announced. It is about how we structure the future Army and how we support it to deliver the greatest possible military effect with the manpower available.
	The Chief of the General Staff could have taken the attitude that a given reduction in regular manpower must inevitably lead to a similar reduction in military capability, but he did not. He has grasped the opportunity presented by the end of the Afghan campaign to fundamentally review the structure of the Army and its relationships with the reserves and its commercial contractors.
	A team led by Lieutenant General Nick Carter has produced Army 2020, a detailed plan for a future Army with two distinct elements: reaction forces and adaptable forces. The reaction forces will generate high-readiness contingent capability, trained and equipped to undertake the full spectrum of intervention tasks, including provision of forces for the first phases of any future brigade-scale enduring operation. The reaction forces will be based around 16 Air Assault Brigade and three armoured infantry brigades, and equipped with new or upgraded armoured fighting vehicles.
	Given the high readiness of this force, it will be made up predominantly of regular troops. The reaction forces will form a powerful UK contribution to a coalition effort and act as the initial land component of a joint war-fighting operation, alongside air and maritime components. At best effort, it will deliver a division into the field. The remaining infantry and armoured units will form the adaptable forces, a pool of regular and reserve units, commanded by seven infantry brigade headquarters, capable of generating forces for tasks, including overseas capacity building, homeland resilience, the Army's standing commitments, such as Cyprus, Brunei, the Falklands and ceremonial duties, and, when required, generating the further brigades to sustain any future enduring operation.
	Over a full career, soldiers and officers in infantry and armoured units will expect to serve in both reaction and adaptable forces. Both the reaction forces and the adaptable forces will include force troops, the artillery, engineers, signals, REME, logistics, intelligence, medical and other specialist units upon which the Army in the field depends and without which it could not function. To achieve this design while reducing the size of the Regular Army demands a much higher level of integration of the regular and reserve components. In the past, the reserve may have come to be seen by some as an add-on to the Army; in future, the reserve will be a vital integrated component of the Army.
	The requirement for greater integration was a principal conclusion of the independent commission set up to review the UK's Reserve Forces, led by the Vice Chief of the Defence Staff, General Sir Nicholas Houghton. I am most grateful to the members of the commission, including my honourable friend the Member for Canterbury, for their work in producing this invaluable report.
	I can tell the House today that we accept the thrust of the commission's recommendations. In the interest of keeping this Statement to a reasonable length, I have this morning laid a Written Ministerial Statement setting out how we intend to proceed with our plans for enhanced reserves. But I can tell the House that the process of reshaping the reserves for their future role has already begun, and that I have set up an independent scrutiny team to assess its progress, led by Lieutenant General (Retired) Robin Brims, chairman of the council of the Reserve Forces and Cadets Association, who will make his first report in the summer of 2013.
	Let me now return to the future structure of the Army. In reducing the size of the regular Army in line with the announcement made last July, there must, inevitably, be a reduction in the number of units. In headline terms, there will be 17 fewer major units as a result of this announcement. These reductions will fall across the various arms and services of the Army.
	The importance of the regimental system to the British Army and its contribution to the fighting spirit which delivers a battle-winning edge is very clear. I understand the dismay felt particularly by former members at the withdrawal of units that may have illustrious histories and indeed, antecedents. I understand, too, the attachments of the regions and nations of the union to specific units within the British Army, and their pride in those units.
	In designing the new structure, the Army has sought to be sensitive to these issues, but I am also very clear that the Army that emerges from this process must be a forward-looking, modern fighting machine, remaining best of its class, respecting the past and honouring its proud history, but looking resolutely to the future, with its principal focus the brave men and women currently serving, and the units in which they serve.
	The Army has approached this task methodically, carefully redesigning the way it delivers force support; building up a whole force concept that not only gives effect to the integration of the reserves, but also the greater use of contractors-sometimes using sponsored reserves-to support operations, maximising the combat effect of the regular manpower available.
	I should emphasise to the House that the withdrawal or merger of units is completely separate from the redundancy process. An individual in a unit which is withdrawn or merged is no more or less likely than any other individual with similar skills and service record to be selected for redundancy. When units are withdrawn, their personnel are reassigned to other units, where possible within the same regiment. Nor does anything I shall announce today prejudice the basing review which is looking at the optimum future basing pattern for our Armed Forces units around the United Kingdom. I will list the changes to individual units, starting with the Force troops, where 3-9 Regiment Royal Artillery, 2-4 Commando Engineer Regiment, 2-8 Engineer Regiment and 6-7 Works Group will be withdrawn. In the Army Air Corps, 1 Regiment and 9 Regiment will merge in preparation for equipping with Wildcat. In the Royal Logistics Corps, 1 and 2 Logistics Support Regiments will be withdrawn and 23 Pioneer Regiment disbanded, with its functions assumed by other units. 1-0-1 Force Support Battalion REME, and 5 Regiment Royal Military Police will also be withdrawn.
	Army 2020 calls for a greater focus on mobility and the ability to mount expeditionary warfare, based around the air-assault and armoured infantry brigades of the reaction forces. This evolution of our posture still further away from the Cold War lay-down inevitably means a reduction in the size of the Armoured Corps, from 11 units to nine.
	After careful consideration of all the factors, including regional distribution and the requirement for a balance of capability, the Army has decided that this will be achieved by an amalgamation of the Queen's Royal Lancers with the 9th/12th Royal Lancers and a merger between the 1st and 2nd Royal Tank Regiments.
	Turning to the infantry, I can confirm that no current regimental names or cap badges will be lost as a consequence of the changes I am announcing today. Five infantry battalions will be withdrawn from the Army's Order of Battle, all of them from multi-battalion regiments.
	In selecting battalions for withdrawal, the Army has focused on the major recruiting challenges it faces in the infantry. It has looked carefully at recruiting performance, not just at a point in time, but over the last decade; at recruiting catchment areas and at demographic projections for the age cohort from which infantry recruits are drawn. It has also considered regional and national affiliations, the merger and disbandment history of individual battalions and existing commitments of battalions to future operations. The overriding objective has been to arrive at a solution which those currently serving in the Army will see as fair and equitable.
	The conclusion of this process has been that 2nd Battalion the Royal Regiment of Fusiliers; 2nd Battalion the Yorkshire Regiment; 3rd Battalion the Mercian Regiment; and 2nd Battalion the Royal Welsh will be withdrawn from the Order of Battle.
	In addition, the Royal Regiment of Scotland will see one battalion reduced to a single company. Ministers have agreed with the CGS that, in order to raise the profile of the Royal Regiment of Scotland, and of the Army, in Scotland, a public duties company will be created, returning sentries to Edinburgh Castle and the Palace of Holyroodhouse on a permanent basis for the first time in years. Accordingly, the Argyll and Sutherland Highlanders, 5th Battalion, the Royal Regiment of Scotland, will be re-roled as a public duties company.
	These withdrawals and mergers, unwelcome as they will be in the units affected, are fair and balanced and have been carefully structured to minimise the impact of the regular manpower reduction and maximise the military effectiveness of the Army. The reduction in regular forces will be offset by the enhanced role of the reserves and the whole force concept, which optimises the use of contractors both in peacetime and on operations.
	The Chief of the General Staff and his team assess that this configuration will mean that Army 2020 can deliver the level of capability agreed in the SDSR. That is an excellent outcome given the appalling state of our inheritance at MoD, and I am extremely grateful to the CGS and the senior leadership of the Army for the constructive and intelligent way in which they managed this process. What I have announced today, while difficult and challenging for those directly affected, represents a vision for the future of a balanced, capable and adaptable British Army that will remain best in class.
	The British Army has seen several transformations since the end of World War II: from wartime structure to Cold War; from conscription to professional force; and the downsizing at the end of the Cold War in Options for Change and Frontline First. Now it is embarking on another. The values of the Army have endured through previous transformations. They have sustained it through a decade of continuous campaigns. Those same values-courage, discipline, respect, integrity, loyalty and selflessness-will sustain it through this transformation and, no doubt, through many further iterations in the decades and centuries ahead, as this most enduring of British institutions looks confidently to a future in which it continues to adapt to an ever-changing world. I commend this Statement to the House".
	My Lords, that concludes the Statement.

Lord Rosser: My Lords, I associate this side of the House with the tributes paid by the Minister to the three air crew who were involved in the Tornado GR4 aircraft incident on Tuesday and who were killed or are missing, presumed dead; and with the tributes paid to the three members of our Armed Forces who were killed recently on operations in Afghanistan. We, too, extend our sincere condolences to their families and friends at this difficult time. Our thoughts are also with the fourth member of the Tornado squadron, who remains in hospital.
	I thank the Minister for repeating the Statement made in the other place by the Secretary of State. We endorse the comments about the commitment and professionalism of our Armed Forces. The Secretary of State's Statement-true to form-contained two references to the financial situation, one near the beginning and one near the end. Claims about a £38-billion black hole continue to be made. However, this figure has not been supported by the National Audit Office; it appears to assume no increase in financial resources over a 10-year period, when even the Government's SDSR stated that the defence budget would rise in cash terms; and, despite requests from the Commons Defence Select Committee, the Government failed to produce a breakdown of their figure to show how it had been calculated. One can only draw the obvious conclusion that the figure has no substance.
	I will raise a number of points in view of the fact that the announcement today was primarily financially driven. As the Minister said, the withdrawals and mergers will hardly be welcomed in the units affected. The Statement said that it was about how we should structure the future Army and support it to deliver the greatest possible military effect with the manpower available. Later on the Statement says that,
	"no current Regimental names or cap badges will be lost as a consequence of the changes".
	Can the Minister say which came first in determining the Government's plans for the future structure of the Army? Was it the need to ensure that the future Army looked at as a whole would have the greatest possible military effect with the manpower available, or was it the need to ensure that no regimental names or cap badges would be lost?
	The Statement indicates, as indeed did the strategic defence and security review, that reservists will play a bigger role in future operations, since the number of reservists is rising while the number of regular troops is being reduced to 82,000, which is well below the figure indicated in the 2010 SDSR. Bearing that in mind, the question of how long a future operation could be sustained is highly relevant, not least in the light of the defence planning assumptions referred to in the SDSR. Reservists may be able to be away from their regular employment for a few months, but there may be greater difficulties over their availability if they are required to be away for longer periods or for regular and sustained periods of a few months. It is not just a case of how long an employer might be prepared to accept the absence of an employee, but from the employee's point of view it is also about the impact that regular and extended absences might have on career development, including progression within the organisation or company where they are employed.
	For how long and how frequently do the Government envisage that reservists will be deployed in support of an extended or enduring operation? The Secretary of State's Written Ministerial Statement today refers to reservists accepting a liability for up to six months' deployed service plus pre-deployment training in a five-year period. Is that the maximum commitment that will be expected of reservists under the Army 2020 proposals, even if we are involved in the maximum number of operations and interventions at any one time laid down in the 2010 SDSR? If the role of reservists is to be enhanced, what discussions have there been with employers' organisations on the implications for them? I understand that the answer may well be, effectively, none.
	The Statement the Minister has repeated said that it was not about the size of the Army, but it is when compared with what was envisaged at the time of the strategic defence and security review, which announced cuts of 7,000. Since then the Government have announced an additional 13,000 Army redundancies. The SDSR was based on an assumption that we could undertake one major and two lesser operations at any one time. It said that the Armed Forces in the future would be sized and shaped to conduct an "enduring stabilisation operation" at around brigade level involving up to 6,500 personnel with maritime and air support as required, while conducting one non-enduring complex intervention involving up to 2,000 personnel and one non-enduring simple intervention involving up to 1,000 personnel, or, for a limited time and with sufficient warning, committing all our effort to a one-off intervention of up to three brigades with maritime and air support involving around 30,000 personnel. Does this Armed Forces capability set out in the 2010 SDSR still hold in the light of the Statement today about the future shape and structure of the Army and the further reductions in Regular Army personnel announced since the SDSR, and is it still the situation in the light of the higher percentage of our future Army personnel who will be reservists?
	What is the maximum length of time for which we could conduct the "enduring stabilisation operation" referred to in the SDSR in the light of the Statement today and statements made since the SDSR about the size and structure of the Army, and is it a shorter period of time than that envisaged at the time of the SDSR? How long is "for a limited time" for the one-off intervention referred to in the SDSR in the light of the Statement today and statements made since the SDSR, and is that now a shorter period than that envisaged at the time of the SDSR?
	The Statement lays out the future structure for the Army, but just how resilient is that structure? There is nothing in the Statement to suggest there has been any risk analysis undertaken in the light of developments in the last couple of years since the 2010 SDSR, despite those two years hardly being ones of stability in the world around us. Neither does there appear to have been a risk analysis of the consequences of our Army relying to a greater degree than before on reservists as opposed to regular troops. The Statement gives every impression of simply driving on from the 2010 SDSR without any obvious regard to the impact of changes and developments that have taken place since the SDSR.
	The Statement is about the future shape and structure of the Army. What happens if the 2015 SDSR indicates a need for operations to be undertaken by the Army which are radically different from those indicated in the 2010 SDSR and this Statement? Is this new structure for the Army capable of embracing radically different operations? For example, will the split between reaction forces and adaptable forces still be relevant? Would the split between regulars and reservists still be appropriate, or is this a shape and structure that might not survive the 2015 SDSR? It may be that this Statement is, in reality, the beginnings of the 2015 SDSR. Will the 2015 SDSR be based on an assessment of the threats we face to our security and to our interests, with the numbers of Armed Forces personnel and the shape and structure of the Army being determined by the requirements and capabilities needed to meet those threats? Or will it be the case that today's Statement on shape and structure sets out the kind of operations, in size and areas of capability, that the Army is geared to meet and that the rest of the 2015 SDSR will have to fit round it?
	I sense a real risk in the smaller, reshaped and reconfigured Army that this Statement reveals. It appears to be based on an assumption that, with our withdrawal from Afghanistan, our commitments will reduce and remain at a lower level despite the current uncertainty and instability in the world. It also seems that, while a much heavier reliance will be placed on reservists in future, little has been done to consider and address the likely practical problems that will arise and whether, in reality, we will be able to meet effectively the capabilities that this Statement requires of the Army, including the commitments on the number and types of operation that could be conducted at any one time, as laid down in the 2010 SDSR. There is a strong sense that key parts of this Statement are expressions of hope rather than conclusions based on hard and robust evidence. I hope the Government's gamble pays off, because if it does not it is our country and our people who will be exposed to the potentially very serious consequences.

Lord Astor of Hever: My Lords, the noble Lord started by talking about the £38-billion black hole. I do not want to score political points at the Dispatch Box but neither will I take any lectures from Labour on the £38-billion black hole. Defence must take its share in helping to reduce the deficit and our debt. Without a strong economy and stable public finances, it is impossible to build and sustain the military required to project power and maintain defence.
	We have had to take difficult decisions. I should rephrase that: the Army and the Chief of the General Staff have had to take some very tough decisions. Despite the cuts that have been announced, Army 2020 will deliver approximately 90% of its current combat effect. The Army has produced an excellent paper, Transforming the British Army, which I commend to all noble Lords. In the light of the interest in the changes today, I have asked for copies of it to be put in all Whips' offices. We are very clear that tradition and history must be respected, but it is also important to look to the future and ensure that the changes are seen as fair by those brave men and women currently serving and risking their lives.
	I wrote as fast as I could, but I may not be able to answer all of the noble Lord's questions. If not, I will certainly write to him. His first question asked what criteria were used to decide which units would be affected. A number of criteria have been taken into account before making final decisions, all of which presuppose the retention of a regimental system largely based on regional connections that continues to serve the British Army so well. These include maintaining balance across the broader armoured corps and infantry regimental structure and the capability roles within it, enabling efficient management of personnel, ensuring parity of opportunity and development for soldiers and officers, balancing regionally based regimental recruiting demand, looking back at the past 10 years' recruiting performance, looking at the next 10 years' demographics of regional recruitment pools to retain an effective regimental system, taking account of previous decisions on mergers and deletions, and limiting the number of cap badges affected, thereby ensuring a solution that those serving in the Army will see as fair and sustainable under the circumstances.
	The noble Lord asked what underpinned these changes. The 2010 strategic defence and security review set out how the Armed Forces would be restructured to meet current threats, including managing risks before they materialise, and maintain a broad spectrum of defence capabilities. The SDSR also directed that the Army should return from Germany by 2020. Subsequently, further work to balance the books in defence, together with the report of the independent commission on the Reserve Forces, was led by the then Defence Secretary who announced in 2011 a requirement for an Army of 120,000-82,000 regulars, 30,000 trained reserves and 8,000 reserves in training.
	The noble Lord asked about the availability of reserves and our discussions with employers. I can assure him that considerable discussions are taking place and have taken place with employers. If this is going to work, we have to integrate the reserves. We realise how important that is. Also, the Government must get off the mark and be part of the solution. He asked whether Army 2020 reversed the SDSR decisions. The answer is no. Army 2020 redesigns the Army to be able to undertake the task specified by the SDSR, but with fewer regulars and an increased number of better integrated reserves.
	The noble Lord asked whether the Army is able to adapt. The answer to that is yes, of course. I have spoken to a number of officers and soldiers, and they are all very excited at the changes and are up for the challenge. I have also spoken to a number of reserves who are also excited about the changes and very much look forward to the future challenges. He asked about planning assumptions. Army 2020 still delivers the requirements of existing defence planning assumptions, and we cannot of course predict the findings of the 2015 SDSR. He asked what came first when decisions to make these changes were made. The reductions were driven by the requirements in the new Army 2020 structure, then by consideration of which units were the most sustainable, while avoiding the loss of cap badges.
	The noble Lord asked about the five-year period, and I can assure him that there will be no change to the existing reserve mobilisation rules. Finally, he asked: how long is a long intervention? Army 2020 is capable of a long-term enduring operation.
	I hope that I have answered most of the noble Lord's questions, but I will certainly write to him on any others.

Lord Touhig: My Lords, a year ago next Tuesday, the Prime Minister stood up to address the National Assembly for Wales in Cardiff and said he wanted to record his gratitude to the brave Welsh regiments. He went on to say:
	"From the trenches of Northern France to the mountains of South Korea they have fought and died in defence of our nation and our values".
	He concluded by saying,
	"I will always be an advocate for this country and everything it has to offer".
	Wales can offer no greater sacrifice than the lives of her young men in defence of our country as we have seen in Afghanistan. With the Prime Minister's words fresh in my mind-and perhaps more in despair than in hope of an answer-what more could we have done in Wales to protect the Welsh regiments from these government cuts, short of threatening a referendum on independence?

Lord Astor of Hever: My Lords, I share the noble Lord's respect for the Welsh regiments. The CGS, supported by his command team, has made very hard choices in deciding where reductions are made to bring the Army size down to 82,000, and the Army has rigorously applied a set of criteria to make these difficult decisions. They were based on capability, recruiting demography both now and in the future, appropriate national representation and solutions that do not undermine regimental principles, established in the last round of changes in 2004. Previous mergers and deletions were also taken into account, to ensure that decisions were seen as fair by as many people as possible.

Lord Lee of Trafford: My Lords, from these Benches I join the earlier tribute to the Tornado crews lost in Scotland and to those soldiers killed in Afghanistan. Perhaps I may say that just having a few minutes to question this important Statement is extremely unsatisfactory and almost an insult to our Armed Forces. I hope that before too long we will have a proper debate on our Armed Forces and that my noble friend will discuss this with the Leader of the House. It is somewhat ironic, I would suggest, that in the Statement reference is made to "an increasingly uncertain world", yet today we are talking about reducing significantly the size of our Regular Forces.
	On the question of the reserves, I have three specific questions. First, how many members of the Regular Forces does he expect will be involved in training 30,000 new reservists? Secondly, does he believe that in future we will probably need a specific covenant to protect our Reserve Forces from things such as totally unhelpful and unprincipled employers? Thirdly, where will all this new training be done, given that we seem to have a significant problem with our bases? If I interpret correctly the article today in The Times about bringing back our forces from Germany, this seems to be on the backburner, with a question mark over it.

Lord Astor of Hever: My Lords, my noble friend mentioned the possibility of a debate and I would certainly welcome that. I will have a word with our Chief Whip and see if it would be possible later in the year. My noble friend mentioned the reserves and employers. The Ministry of Defence is committed to working with employers to understand their views on its use of reservists, the impact of legislation and a better understanding of what an employer can realistically sustain in future. We will publish a consultation paper in autumn setting out our proposals. Following that, we will be able to make informed decisions early next year on the terms and conditions of service, employer engagement, the Government's commitments as an employer and any legislation necessary.
	My noble friend asked how many people would be involved in training. I cannot come up with a specific figure, but this is a good example of where integration of the reserves with the regular Army will be so important and we will use a number of the reserves to help with the training. As for where they would train, we have not yet decided what will happen in Germany, but there are very good training areas there which we might continue to use after 2020. The SDR talks about bringing all our troops back from Germany by 2020. As my noble friend knows, there are some brilliant training areas in this country. He and I have been to Salisbury Plain, Otterburn and lots of different training areas. In Wales, I spent a lot of my time in the Army at Sennybridge with its beautiful countryside. So there are a lot of training areas and I hope that answers all my noble friend's questions.

Lord Ramsbotham: I, too, thank the Minister for his reply and declare two lateral interests with regard to the Statement. First, as Adjutant General to the Army, I had to implement the Options for Change instruction to reduce the Army by a third over three years. Let us remember what that meant in terms of all the people who were in the Army. Secondly, Lieutenant General Nick Carter was at one time my ADC and later MA. He, his father and I served together in the same regiment, the Rifle Brigade, whose tie I am proud to be wearing today.
	I have two things to say. First, I think like many of us, I deplore the leaking of this Statement during the past few days, because I wonder whether those responsible for it realise the damage that it has done to the morale and well-being of the Armed Forces whom they claim to support. I hope that the Minister will take every possible step to discover who is responsible for this and take appropriate action. It must not be allowed to happen.
	The noble Lord, Lord Lee, asked for a debate on defence. I welcome that, because the other thing that I wanted to say was about striking the balance between the Armed Forces. I wonder whether the Army has gone a step further than the other two forces. If there is any restructuring or rebalancing to be done, will the Army be reconsidered in the light of what happens?
	My question relates to the last page of the Statement, which says that the vision is that the Army will remain "best in class". Who else is in that class?

Lord Astor of Hever: My Lords, the noble Lord mentioned General Nick Carter and the Rifles. The Rifles are a very good example of a change that has really worked. All the people I meet who serve in the Rifles are hugely proud of that regiment and of the successful change that it has made.
	The noble Lord mentioned the leaks, which did not come from the Ministry of Defence. I was told about these changes only yesterday. A very small group of people in the Ministry of Defence knew of them, so I do not know where the leak has come from. I will certainly go back to the department and see whether we cannot do more to stop such leaks.
	We could debate "best in class" all afternoon, but I have met quite a number of officers and reservists in the past 24 hours who are hugely excited about the challenges of the future and really feel that they are up to it.

Lord Crickhowell: My Lords-

Lord Anderson of Swansea: My Lords-

Baroness Verma: My Lords, I think that it is the turn of the Conservative Benches.

Lord Crickhowell: I fully understand why this is being done and I fear that £38 billion is probably an underestimate. The noble Lord, Lord Ramsbotham, referred to leaks. There is one other feature of this Statement which I regret: it disguises the historic names which are disappearing. My noble friend referred to "current regimental names" and the Statement named the 2ndand 3rd Battalions. However, the 1st Battalion The Royal Regiment of Wales, carries the title "1st Battalion Royal Regiment of Wales (Royal Welsh Fusiliers)". I do not know, now that the 2nd Battalion is to disappear, whether that historic name can be retained or what other historic names can be retained. Luckily, we have retained, I believe, in the Royal Regiment of Wales the historic flash, the hackle and other regimental insignia. I hope that in future Statements an explanation is given of exactly which historic regiments are going and how their traditions are to be maintained as far as possible, because they are of great importance when it comes to pride and to recruiting in the areas concerned.

Lord Astor of Hever: My noble friend makes a very good point. This is not a matter for politicians; it is a matter for the Army. It must decide how these regiments will go forward and whether antecedents will be included. I go back to the point I made about The Rifles and how successful the term "The Rifles" has been and how proud soldiers serving in The Rifles are of that.
	I can come up with a better answer for the noble Lord, Lord Ramsbotham, about the best in class. Clearly, we are not able to compete with the United States but the British Army is the partner of choice within NATO for its strength and capability.

Lord Dannatt: My Lords, the Statement quite rightly draws favourable attention to the work of the Chief of the General Staff. I certainly echo that. He and his staff have made a very good fist out of the problem that was passed to them. But does the Minister accept that there are elements of risk that are beyond the capability of the Chief of the General Staff to manage himself within current Army resources? We all know that in the past two years of the current Government major decisions have been made on defence-in shorthand terms, prioritising a number of equipment programmes over manpower. That has brought us today to the announcement of a reduction in the size of the Army by 20%-a very sobering day for the Army, whichever way you look at it. Will the Minister assure the House that he will keep these elements of risk under review?
	The risks I point to in particular are whether the noble intention to furnish the size of the Army up by a further 30,000 from the reserve will come about successfully. One hopes it will but there is an element of risk in it. Secondly, the Army's equipment also carries a fair degree of risk. It lacks a protected manoeuvre capability for those armoured infantry brigades. Protected mobility has come out of Afghanistan with the armoured vehicles that have been provided for that operation but battlefield manoeuvre is woefully lacking and unlikely to be fielded until 2022. So will the Minister assure the House that these areas of risk will be kept under review, particularly in the context of the strategic defence review of 2015?

Lord Astor of Hever: My Lords, I cannot commit any future Government to what comes out of the SDSR in 2015 but I can assure him that we, and I think any sensible Government, will keep all these issues under review. On the noble Lord's point about risk, I discussed this at some length with the Chief of the General Staff and he is very confident that he is on top of this issue and that we can handle any risk in future.

Lord Anderson of Swansea: My Lords, following on from the point made by the noble Lords, Lord Ramsbotham and Lord Crickhowell, would it be fair to say that the MoD is the only vessel which leaks from the top? Referring to the reserves and the points made, clearly the success or otherwise of the new proposals depend on the enhanced role envisaged for the Territorial Army, and that in turn depends on the co-operation of employees both in the private and the public sector. Is it not a fact that more and more companies are not headed by people with military experience but are foreign-owned and therefore less likely to understand the national needs here? What is the position in respect of those companies, particularly if there are longer periods abroad? As for the public sector, what estimate has been made of the availability of staff to cover shortage areas, such as anaesthetists, at a time when there are increasing pressures on our hospital services? Also, many reservists and particularly their families do not envisage these longer periods of service.

Lord Astor of Hever: My Lords, the noble Lord makes a very good point. Out in Afghanistan at the moment we rely on a lot of reserve medics. I was out in Camp Bastion in March and I met a number of anaesthetists, surgeons and people playing vital medical roles, many of whom are reserves who help the regulars.
	The noble Lord talked about leaks. This leak did not come from the Ministry of Defence. I can assure the noble Lord of that.
	The noble Lord talked about the enhanced roles of the reservists. In the Statement there was mention of the independent scrutiny team to assess the progress that we are making with the reserves. This is led by General Robin Brims, who is chairman of the Council of Reserve Forces' and Cadets' Associations. He will make his first report in the summer of 2013. This is an issue which we are taking very seriously and it is not going to work unless the reserves are fully integrated into the regular Army.

Lord Burnett: My Lords, I was concerned to hear that 24 Commando Regiment Royal Engineers is to be withdrawn. Can my noble friend tell me which formation will fulfil the engineer functions in support of the 3rd Commando Brigade Royal Marines?
	The Statement refers to redundancies which are happening and which will follow. As my noble friend said, the British Army has shown the highest standards of professionalism, courage and devotion to duty, particularly over the past 15 years of continuous and hazardous war-fighting. If it is decided that a member of the Armed Forces is to be made compulsorily redundant after 15 years of service, and is offered a financial package actuarially calculated to be worth, say, £100,000, whereas if he or she had served for 16 years it would have been worth £110,000 or, more likely, more, the very least our Government should do is to compensate that person on a pro rata accrual basis.
	I know that my noble friend will share my concerns and agree that generosity, fairness and integrity should be the underlying principles in these matters. Will he look into this matter as one of urgency to ensure that the Government's deeds match their words?

Lord Astor of Hever: I understand that 24 Commando Engineers is an Army regiment that supports the Royal Marines. Although we are withdrawing the regiment, we will leave behind a squadron, which has only 20 fewer people than a regiment, so it will not be a serious change.
	On my noble friend's second question, I will look into the matter, but it is inevitable that some of those selected for redundancy may leave without completing sufficient service to qualify for an immediate pension or equivalent. The Armed Forces pension scheme recognises that, by paying significantly larger tax-free redundancy compensation lump sums to those who narrowly miss out on immediate incomes than to those who qualify.
	Any pensions rights that have been earned will also be preserved, meaning that an index-linked pension and further tax-free lump sum become payable at the age of 60 or 65, depending on the pension scheme. Whereas the majority of other ranks normally have to serve 22 years before receiving immediate income, the Armed Forces redundancy scheme has reduced that requirement to 18 years, a concession of four years which will enable many redundantees to receive an immediate income for which they would otherwise not have qualified.

The Earl of Caithness: Will my noble friend tell the House by how much the Royal Regiment of Scotland will be reduced?

Lord Astor of Hever: One battalion, which I think is about 650, will go down to company strength. That will be an integrated company that will perform the ceremonial at Holyrood and Edinburgh Castle and will take soldiers from the rest of the Scottish regiments.

Lord Stirrup: My Lords, if the plans for Army 2020 are to have any chance of success, we shall need a fundamental change in this country of culture, not organisational process, with regard to the status of reservists in society and the workplace. Meanwhile, the Ministry of Defence has just announced a triennial review of the National Employer Advisory Board, a crucial body contributing to the development of reserve policy. Rather than a routine triennial review at this stage, would it not make sense to seize the opportunity to bring together employers, reservists and regulars to work out a plan to achieve the culture change without which Army 2020 simply will not work?

Lord Astor of Hever: My Lords, the noble and gallant Lord makes a very good point about employers. A lot of discussion is taking place with employers. As I have said twice, we attach much importance to our relationship with employers. This will not work unless we bring them on side. A lot is happening, but I would be very interested to hear any suggestions from the noble and gallant Lord.

Sexual Offences Act 2003 (Remedial) Order 2012

Copy of the SI
	19th Report from Human Rights Committee
	1st Report from Human Rights Committee

Motion to Approve

Moved By Baroness Stowell of Beeston
	That the draft order laid before the House on 5 March be approved.
	Relevant documents: 19th Report from the Human Rights Committee, Session 2010-12; 1st Report from the Human Rights Committee.

Baroness Stowell of Beeston: My Lords, the purpose of this debate is to consider the two statutory instruments laid in draft before the House by the Government under, or in relation to, the Sexual Offences Act 2003. The first is the Sexual Offences Act 2003 (Remedial) Order 2012, which sets out the Government's response to the Supreme Court ruling in F and Thompson. The second is a set of regulations that will strengthen the notification requirements for registered sex offenders. This follows a public consultation carried out last summer by the Government. I shall address each instrument in turn.
	Currently, where a sex offender is sentenced to imprisonment for a term of 30 months or more under Part 2 of the Sexual Offences Act 2003, they will be subject to indefinite notification requirements for life, with no possibility of a review. In other words, on completion on his prison sentence a serious sex offender is placed on what is commonly known as the sex offenders register for life. On 21 April 2010 the United Kingdom Supreme Court made a declaration, following an appeal to it made by claimants known as F and Thompson, that the requirement for indefinite notification-also known as life on the sexual offenders register-with no opportunity for review is incompatible with Article 8 of the European Convention on Human Rights, which concerns the right to a private life and family life. To put it another way, the Supreme Court ruled that if a person is included on the sex offenders register for life, they should at some point during their lifetime have the right to request that their inclusion on the sex offenders register be reviewed. I stress the word "reviewed". They have a right to request a review, not a right to be removed from that register.
	Our constitutional arrangements are such that when the highest court of the land identifies an incompatibility with the European Convention on Human Rights, the Government of the day, whoever is in power, take remedial action. This is for various reasons, not the least of which is to ensure that the Government are not left vulnerable to further legal proceedings, potentially involving millions of pounds of taxpayers' money. All that said, in February last year the Home Secretary and the Prime Minister made it clear that the Government would do only what was necessary to remedy the incompatibility declared by the court.
	When considering the Supreme Court's decision, the Government, in deciding what action to take, wanted to ensure that we struck the right balance: putting public protection first and foremost while acknowledging that these offenders also have a right to request a review of the length of time that they spend on the sex offenders register. This approach was reflected in the Government's initial proposal to make a remedial order to remove the incompatibility, which was laid before this House on 14 June last year. The Joint Committee on Human Rights considered our proposal and published its recommendations in its first report on 13 October last year. Its most significant recommendation was that, in order to ensure a sufficiently independent element to the review process, our proposal should be amended to provide either that the review be conducted by,
	"an independent and impartial tribunal",
	by which it meant the courts, or that there be a,
	"right of appeal from the decision of the police to an independent and impartial tribunal",
	by which again it meant the courts.
	We were grateful to the JCHR for its report, which we considered in detail. As I have said, the Government have been clear throughout that, in removing the incompatibility, public safety remains the first priority. After careful consideration, the Government decided not to accept the JCHR's recommendation that the review be led by the courts. The Government remain of the view that the police are best placed to carry out the initial assessment of the level of risk posed by the offender, in conjunction with other bodies through the Multi Agency Public Protection Arrangements, otherwise known as MAPPA. We did, however, accept that it was proportionate to amend the remedial order to allow for the provision for a right of appeal from the police decision to the magistrates' court. After amending the remedial order to include the provision for a right of appeal to the magistrates' court, the Joint Committee on Human Rights published its second report in May this year. We are pleased that the Joint Committee accepts in this report that our proposal now remedies the incompatibility identified in the Supreme Court's ruling.
	I shall take a moment to explain how the order will work in practice. As I have already said, it applies to individuals who are subject to notification requirements for life, under the 2003 Act. This means, in most cases, those who have committed the most serious offences listed in Schedule 3 to the 2003 Act, which include, for example, rape and sexual activities involving children.
	Let me be clear. Offenders will continue to be placed on the sex offenders register for life, just as they are now. They will not come off the register automatically. The remedial order only provides a mechanism by which a sex offender can apply for a police review of whether they should cease to be on the register. The onus is always on the offender to make the application and to demonstrate that they no longer pose a risk. This means that an offender will be required to submit an application to the police seeking a review of their indefinite notification requirements. This will be only once a fixed period of time has elapsed following the offender's release from custody. For adults, we have proposed that this period of time will be 15 years; for a child it will be eight years.
	We know that if an offender is to re-offend after completing their prison sentence, it is in the early years of release when it is most likely that that will happen, the majority of these taking place within 10 years of release. That is why our proposal ensures that no adult sex offender will be able to apply for a review until 15 years after they have been released from custody. That will be their first opportunity.
	This remedial order ensures that a robust review, led by the police, in conjunction with other agencies, will be carried out so that a full picture of the risks to the public can be considered before any decision is made on whether to remove an offender from the register. Let me be absolutely clear. Our proposals make sure that sex offenders who continue to pose a risk will remain on the register and will do so for life if necessary.
	The second instrument that we are considering today follows a consultation carried out last year on options for strengthening the notification requirements applying to registered sex offenders. Currently, when a person is convicted, or cautioned for an offence under Schedule 3 to the Sexual Offences Act 2003, they will automatically be subject to notification requirements, which, as I stated earlier, is more commonly referred to as the sex offenders register. While subject to these requirements, the offender will be required to provide their local police station with personal details annually, or whenever their details change. The most high-risk offenders are subject to additional further conditions and surveillance by local multi-agency public protection panels.
	The police identified vulnerable areas in the current arrangements which could lead to some offenders seeking to exploit gaps in the system. To strengthen and extend current checks, this instrument makes four changes to the current notification requirements which apply to all registered sex offenders. First, they must now notify the police of all foreign travel. Offenders who travel abroad for less than three days will be required to notify in the same way as those who travel for longer must do under the existing regime. Secondly, offenders with no fixed abode must notify the police weekly of where they can be found. Thirdly, offenders must from now on notify the police when they are residing with a child under the age of 18. Finally, offenders must notify the police about their bank account and credit card details and notify certain information about their passports or other identity documents at each notification, thus tightening the rules so that sex offenders can no longer seek to avoid being on the register by changing their name.
	ACPO and CEOP have both expressed their support for these changes. They believe that these measures will enhance our ability to protect the public and ensure that our management of sex offenders remains effective in an ever-changing world. In the event that an offender fails to comply with the notification requirements or with the terms of any order restricting their movement or actions, they will have committed a criminal offence and can be imprisoned for up to five years.
	In taking these changes forward, ACPO recognises that there will be resource implications to informing the 53,500 registered sex offenders across England and Wales who are subject to these new requirements, and to ensuring that they are all complying with the new requirements when these come into effect. ACPO has been clear throughout that, in calling for these additional changes, it was prepared to meet the additional workload. My officials have been working with ACPO for some months now to help it in its preparations.
	Public protection remains a fundamental priority for this Government. The changes made in these two instruments address the incompatibility identified by the Supreme Court but they do so in a way that ensures public protection against these offenders. We have also closed a number of loopholes identified by the police in respect of all sex offenders. These changes mean that we continue to have one of the most rigorous and robust approaches to sex offender management in the world. I beg to move.

Baroness Smith of Basildon: My Lords, I am grateful to the Minister for her explanation and the information that she has given to the House on the two sexual offences orders. I shall take them in reverse order. On the notification requirements order, we are broadly supportive but I have a couple of questions, and I was able to have a brief discussion with the Minister earlier to give some indication of what I wanted to ask. My understanding is that the order applies to England and Wales, because policies relating to sex offenders in Scotland and Northern Ireland are devolved to those Administrations. I would have thought, though, that it was important to have some consistency between England and Wales legislation and that in the devolved Administrations. Are there any differences across the UK and, if there are, what are they and how are they being addressed?
	I am happy to be corrected if I am wrong, but I think that Northern Ireland currently retains its three-day loophole, as it has become known, whereby an individual does not have to notify the police of foreign travel of less than three days. Have the Government had any discussions with Ministers in the Northern Ireland Assembly and the Scottish Parliament on this issue? What discussions have there been with other European countries? Do they have similar reporting and notification requirements? What co-operation is there between the UK and other European national police forces? That seems to be an area where greater co-operation between us and EU police forces would make great sense.
	I was able to talk briefly earlier to the Minister about notification requirements for online identities. I am not clear how these are covered or whether they are covered effectively. I am aware that online social networks are increasingly used to contact and groom young people for sex offences. There are some quite horrific and frightening examples. Jenny Chapman, MP for Darlington, has taken this issue up very robustly. In her constituency a young woman called Ashleigh Hall, who was 17 years old, was tricked into meeting a 33 year-old convicted sex offender, who posed on the internet as a 19 year-old man, and she lost her life as a result of meeting up with him.
	It is clear that convicted sex offenders register different identities online. Given that registered sex offenders have to notify the police of any identity documents that they have-passports, for example-I am not clear how online identities fit into the proposed and current notification requirements. We are all aware that there are sex offenders who are frighteningly clever and devious in stalking and grooming their prey and that it is perfectly possible to set up different, multiple online identities. I am not so naive as to think that telling a registered convicted sex offender that he will have to tell the police about each and every online identity would work on its own, but clearly this is a problem area. Given the information in the impact assessment on the second order about sex offenders' propensity to reoffend, this area must be monitored, and I am interested in how the Government plan to do so. Maybe that is in other legislation that I am not aware of, but I thought that it might have been in here as we are talking about notification requirements.
	If this is helpful, Surrey Police has pioneered-it has been honoured for the work that it has done in this area-innovative software that monitors online sex offenders. I understand that it has successfully trialled this and now uses it to monitor 25 different criminals. This software installs onto their computer software which monitors use and sends alerts if any risky behaviour is detected. It is looking to use that across the country. So there are ways of starting to deal with this. However, I would be interested to know what the current position is, just in case I have missed something and there is something in this order or other legislation that covers the creation of online identities by those who seek to groom young people for sexual abuse, an activity which led, in that case, to murder. Have the Government sought the views and advice of the Child Exploitation and Online Protection Centre? The noble Baroness mentioned that they have its support, but just in the implementation-it is not mentioned in the consultation documents as a consultee. I am sure that the Government will have had some contact and I that think their input would have been helpful.
	On the second order, the remedial order about reviews, I am far less comfortable that the Government are taking the right position. I am grateful to the noble Baroness, who knows my concerns, for taking time to explain the Government's views. I have also read the report by the Joint Committee on Human Rights, which is helpful in explaining why the Government are bringing this order forward, following the case of F and Thompson v Secretary of State for the Home Department in which the Supreme Court declared that the indefinite notification requirements in the Sexual Offences Act 2003 were incompatible with Article 8. That happened because, if I understand it correctly, there was not the opportunity for the individual to be treated as an individual and to apply to come off the register.
	I am concerned about the Government's inconsistency on legal judgments. Clearly the Government have been keen to accept the judgment of the Supreme Court on this issue and in legislative terms. Many noble Lords who have been in this House longer than I have will recognise that this legislation has been brought forward quite quickly. However, the Government do not always take this view. In fact, when the European Court of Human Rights ruled on the right of prisoners to vote, the Prime Minister-although he may have been in opposition at the time-said that it made him physically sick. I do not go that far, although I think that one of the consequences of losing one's liberty through crime is a loss of the vote for the period of incarceration. However, I cannot understand why he does not feel equally strongly about this issue, which has a far greater emotional impact for me.
	I also see the order in the context of other changes that the Government are making to legislation involving the registration of those convicted of sexual offences. We have seen in the Protection of Freedoms Act how the definition of a regulated activity-when someone is on the sexual offences register, they cannot work in a regulated activity-is now far narrower than it was. Also, whereas previously someone automatically went on to a register, there is now a gap of around eight weeks and someone can apply to come off the register before they go on it. Whereas before they could apply to come off the register, now they might never go on it, depending on the outcome of the initial review.
	At the moment there are around 53,000 convicted sex offenders on the register. More than 29,000 of those are on it indefinitely and, in effect, they are the subject of the order. I have tried to understand the Government's rationale beyond the Supreme Court decision. I looked at the impact assessment and wondered what other avenues the Government considered. The Government looked at options from doing nothing to a full court-administered review system and plumped for the option before us today, option 4. There are three things to look at-the costs, the benefit and the risk. Page 16 of the impact assessment shows the costs. I understand that if there is going to be a review process it has to be robust and effective. The assessment states:
	"The costs associated with this option would be absorbed by the agencies to which they fall and would represent opportunity rather than financial costs".
	Those agencies are the police, currently facing 20% cuts in their budget; social services, also facing cuts in their budgets and struggling; and the probation service, which is also facing cuts in its budget. Yet they are being asked to take on additional responsibilities and the Government are not able to identify what those costs are, other than that they are opportunity costs.
	We then come to the transitional costs. The Government say that there will be some costs in the first year for guidance and training, up to an estimated £50,000. However, the impact assessment says that there will be transitional costs for the other agencies, which I assume means the police, social services and the probation service. Regarding those costs the assessment says that it,
	"has not been possible to quantify this".
	Under "Cost of a review", the assessment says that the process,
	"would take up approximately 9 hours of police time, including 3 hours of superintendent time as well as 6 hours of involvement from other agencies... estimated at £630".
	That is a fairly conservative estimate. I worry because although the Government have set up this process, I wonder how the agencies that are required to conduct the review will find the resources to do it as effectively as they need to.
	Page 17 of the impact assessment discusses the "Continuation/Discontinuation of notification requirements". As so often on this subject, the assessment says that things cannot be quantified. For example, it says that,
	"it has not been possible to quantify the cost of those applying for subsequent reviews",
	in terms of the time involved. The Government do not seem to know what the costs will be. However, they do know that they will not have to pay those costs and that somebody else will. That is a concern.

Lord Lester of Herne Hill: So that I can follow the noble Baroness's argument, is it the position of Her Majesty's Opposition that there is some alternative to the view taken by the Joint Committee on Human Rights that these are sensible and proportionate ways of complying with the Supreme Court's judgment and the relevant law? If she is suggesting that, it would be helpful to know what the alternative would be.

Baroness Smith of Basildon: No, at this point I am not suggesting an alternative. I would like the Government to go away and think about the alternatives. I will come on to this later, but if the Government are going to set up a review system, they will need to have more information about the system they are setting up-about the costs, benefits and risks.
	I have looked at the costs. The Government say on page 19 of the impact assessment that the benefits will be similar to those listed in part 3 of the impact assessment, which are relatively minor. The assessment says that,
	"it has not been possible to quantify these"-
	other than to say that if people come off the list then there will be savings in police time. So the Government are not able to tell us the costs or the benefits.
	As for the risks, there are a number of unknowns:
	"There are the following unknowns in relation to this policy:
	The actual volumes of applications for review;The impact of the review mechanism ... The volumes of offenders whose indefinite notification requirements will be discontinued as a result of the review process;The potential impact of ending notification requirements on re-offending rates and detection rates.The actual costs and savings that will result".
	Is it wise not to quantify the costs, benefits or risks while taking a course of action? If the Government think that this is the right course of action then they should line these things up first.
	One risk, of course, is reoffending. The Government's impact assessment states:
	"A number of studies have been considered in the development of this policy which analyse reconviction rates of convicted sex offenders over a follow-up period of 20-25 years. There is no evidence that a point can be reached at which a sex offender presents no risk of re-offending. Approximately a quarter of the previously convicted offenders were reconvicted for a sexual offence within this time period".
	So, within 20 to 25 years, a quarter of those who had been convicted were reconvicted. However, the assessment does tell us:
	"We do not anticipate any greenhouse gas impacts as a result of these proposals".
	I thought that that was rather bizarre.
	I hope that the Minister can address some of the concerns that I have raised because they worry me enormously. However, there are some specific points about the order on which I am clear. The regulations refer to the "determining officer", who I take to be the police officer who will make the judgment on the review. Are the Government clear about what rank, experience, training and guidance that officer should have? The order says that any review would have to be signed off by a superintendent. With the increase in workload given the 20% cuts, I am worried that that will make it more difficult for the superintendent. The review by the superintendent is unlikely to be a rigorous process. The rigour has to come from the determining officer who undertakes the review. Clearly the review itself will have to be a vigorous and detailed process, and I doubt that the Government intend that it should be otherwise. However, unless the Government can be assured that those in the review process have the experience, access to information and the relevant good training, any good intentions for rigorous process will not be realised.
	What evidence does the Minister envisage will be required to enable someone to come off the register when they apply? Will it be sufficient for them not to have breached their notification requirements? Is the onus on the police to prove that they still pose a risk, or will the convicted person on the register have to prove that they no longer pose a risk? The Government have estimated the number of people who might be eligible for review. Has any risk assessment been undertaken to develop guidance on how many of those who are on the register are still deemed to pose a risk and should therefore stay on it?
	I also refer the Minister back to my comments about the very high levels of reoffending. What would happen if an offender were taken off the sex offender register and then convicted of a further offence? Would committing any sexual offence ensure that they would be put back on the register, or just those offences that would have qualified the offender to have been put on the register originally? Would somebody who had been on the register and then come off it only to go back on it-if they are able to go back on it-have the right of appeal in the future; or, as a result of the second instance, would they have to remain on indefinitely? Would there be a chance for them to appeal at a later date?
	There are also many cases where sexual assault cases do not get to court because the victims or witnesses do not want to give evidence or are perhaps unable to. For example, I have personal knowledge of a case where a rape victim was advised by the CPS to pursue an action for GBH rather than rape because it would be easier to get a conviction. I am sure that I am not the only person to have been given that information. Are there circumstances in which somebody who has been charged with an offence, or even cautioned during their time on the register, still be allowed to come off the register?
	It seems that there are some grey areas that the regulations do not cater for. I would be interested to know whether the Minister is able to address these points. I have grave reservations about the proposals both in principle and in practice. I understand the comments that the Minister made at the beginning about trying to achieve a balance-she described it as a balance between individual rights and public safety. However, the principle here is that risk is increased, as even the Government's own impact assessment accepts. The risk is that a convicted serious sex offender could be removed from the register and then reoffend, which is a serious risk. I am sure that the Minister will understand exactly why this needs to be managed. In practice, however, it is an issue of resources to ensure that a review process is set up. For that process to be effective, efficient and risk-free it has to be properly funded-and yet the Government have taken this step at a time when they admit that it cannot be risk free, at a time of massive cuts in the police. I am not convinced that the review process can be as robust as the Government want it to be. I have to say to the Minister that would have given me sleepless nights when I was a Minister. We cannot accept that this is the right way to proceed. I understand that the Government are intent on doing this, but they will have to do it without our support.

Baroness Hamwee: My Lords, the remedial order is one that the House might well have expected to be considering earlier than July 2012. I recall the Statement made by the Home Secretary and repeated in your Lordships' House responding to the order of the judgment of the Supreme Court in February 2011. "Reacting" might have been a better term than "responding". I recall the Home Secretary saying that she was "appalled" by the ruling. The end of her Statement laid into the courts and referred to achieving,
	"a legal framework that brings sanity to cases such as these".-[Official Report, Commons, 16/2/11; col. 960.]
	A number of us reacted to that reaction.
	The Joint Committee on Human Rights has considered the appropriateness of the remedial order and my noble friend Lord Lester of Herne Hill will deal with its report. In February 2011 I recall my noble friend Lord Carlile of Berriew asking why we were not to get amendable primary legislation rather than an order, particularly given the controversial decision that there was to be no judicial procedure. The Explanatory Memorandum to the order says that we have it in this form in order to avoid delay. It seems to me that there has been some delay. Perhaps the delay is a proper delay and we will have a better outcome because of it. The JCHR has considered the matter twice. A Bill is before your Lordships' House now which could give us the opportunity to deal with amendable provisions.
	I recall my instinctive reaction that a review by the police was not appropriate and I have not really varied from that. The police review seems to be an administrative process. The court imposes the original sentence knowing that a sentence of 30 months plus means going on to the sex offenders register. That is mandatory. Perhaps the noble Baroness can tell us more about the procedure. She said that the Government have taken the view that the police are in the best position to make an initial- I think that was her word-assessment of the risk, which seemed to imply that there would be a second stage to the process. Of course, there may be if there is an appeal, but I may have misunderstood her.
	I hope noble Lords will understand that I am not seeking to justify the offences, but does the offender get a hearing? That seems to me to be a basic right. What is the arrangement for allowing the two sides, as it were, to be argued? I am also uneasy that a further review may be deferred at this stage for a further 15 years. Very long periods seem to be involved. Can the noble Baroness also tell your Lordships about the form of the appeal to the magistrates? Listening to the debate, I have only just realised that I am very unclear about what form that may take. I am also uneasy about this being an appropriate matter for the magistrates' court. I know that the JCHR accepts that, but I am a little doubtful whether, in so serious a matter, it should not go to a higher court. The noble Baroness, Lady Smith, asked about numbers. I had assumed that all, or almost all, offenders would seek a review. I am not sure why they should not.
	On the regulations, I note that CEOP, ECPAT and others have said that these will close loopholes and enable more effective offender management. The requirements certainly tighten things up quite considerably. When the Government consulted, I wonder whether they had responses from organisations such as the Howard League which are concerned with the rehabilitation of offenders.
	The Explanatory Memorandum says that the notification requirements will form an invaluable tool. I latched on to the word "invaluable", given that the impact assessment has been unable to quantify the benefits. Perhaps that is a cheap point because I can see that it might be difficult to put a price tag on that and one would not want to put a price tag on the offences that might be prevented.

Lord Lester of Herne Hill: My Lords, I speak on behalf of the Joint Committee on Human Rights. I begin by pointing out to the noble Baroness, Lady Smith of Basildon, that on our committee, which was unanimous throughout consideration of this matter, were the noble Lords, Lord Dubs and Lord Morris of Handsworth, the noble Baronesses, Lady Kennedy of The Shaws and Lady Lister of Burtersett, and it was chaired by Dr Hywel Francis with Mr Virendra Sharma, MP. They are all supporters of the Labour Party and all took an entirely different view from that just expressed by the noble Baroness about this order. I am, frankly, astonished by the criticism that has been made on behalf of the Labour Party.
	The noble Baroness began by making some remarks about prisoners' voting rights, contrasting that with the attitude taken with regard to this order. I remind her that under the previous Government, when the right honourable Jack Straw was Secretary of State for Justice and Lord Chancellor, no action was taken to give effect to the judgment of the European Court of Human Rights in the Hirst case and no action was taken in response to the recommendations repeatedly made by the Joint Committee on Human Rights. What is most welcome about the response of this Government to the judgment of the Supreme Court is that a highly emotive issue has been treated in the best possible way, by a process of parliamentary scrutiny of which I, personally, am very proud.
	Under the Human Rights Act, a special procedure has been included. Where a court makes a declaration of incompatibility with a convention right, the special procedure allows the Government of the day to proceed by subordinate legislation-by affirmative resolution of both Houses-instead of having the need for primary legislation. This is done in order to bring our legal system into full compliance with European human rights law in an appropriate way, provided always that there is effective scrutiny.
	The Joint Committee on Human Rights has the special role of scrutinising draft remedial orders and reporting to both Houses and to the Government as to whether there has been proper compliance. What has happened in this case is extremely welcome. In our first report, we were critical of the first draft remedial order, as my noble friend the Minister acknowledged. Then, the Government responded by listening, and by giving effect to all of our main recommendations. In other words, the work of our committee-an all-party committee, and a beyond-party committee, since it is not controlled by the Government-influenced the Government in reshaping the order which is now before the House for approval today. If one reads the most recent government response to what we have done, dated March 2012, one finds each of our points identified, responded to, and heeded. That is a sign of mature Government, acting in a responsible way, being accountable to Parliament through this watchdog committee, and now in this debate, in both Houses, by affirmative resolution.
	The noble Baroness, on behalf of the Opposition, has queried in detail the impact assessment that has been tabled. I take the completely opposite view. I regard the impact assessment statement as admirable. It lists five different options. It explains why one of those five options was chosen. Of course it cannot quantify the benefits of complying with the law of the land, because the main benefit is to secure the rule of law. That is not something that can be measured in monetary terms and it is quite unreasonable to ask the Government to do so. The main thing, with which I should have thought the Opposition would agree, is the need to comply with the judgment of the Supreme Court of the United Kingdom.
	As my noble friend Lady Hamwee pointed out, when the judgment originally came out, some intemperate remarks were made by the Home Secretary and also by the Prime Minister. That was much criticised-I was one of the critics-because it undermines the rule of law when senior Ministers attack Supreme Court judges in that way. However, what has happened since then is most commendable. A highly emotive issue about sex offenders, who are some of the most evil and revolting criminals that one can imagine but are given a form of fairness and justice all the same, has been translated into a set of sensible legislative proposals that are not exactly as the Joint Committee on Human Rights wished but come very close to it. I say this because often the critics of the Human Rights Act do not realise that one of its benefits is the kind of parliamentary procedure that I have just described.
	Some-not I think in my party-would prefer the fast-track procedure not to be there at all but would like everything to be done by primary legislation. That would make it harder to bring our legal system into compliance with the convention if it were a general matter. I know that that is not what my noble friend Lady Hamwee was saying. I have gone through the procedure because it is not realised that this is a remarkably subtle piece of legislation of which the Labour Party and the previous Government should be proud as it was one of their best achievements. I hope that I have not been too strongly critical of the noble Baroness, Lady Smith. However, I ask her to think again because her criticisms undermine the Human Rights Act process, which ought not to be a matter of dispute across the parties.

Baroness Stowell of Beeston: My Lords, this is a serious issue that needs to be dealt with sensitively. I am grateful for all contributions of noble Lords to the debate. In particular I am grateful to the noble Lord, Lord Lester, for confirming the JCHR's agreement that this remedial order is compatible, and for the remarks he made about the process.
	First, it may be worth repeating some of the things I said to make clear a couple of points before I respond to questions raised and points made in this debate. The crucial point is that convicted sex offenders who have been sentenced to two and a half years or more will still automatically be placed on the sex offenders register for life. This remedial order does not change that. The ruling that led to the order came from the UK Supreme Court. In response to some of the remarks of the noble Baroness, Lady Smith of Basildon, it is worth making it clear that every UK court in the land that heard the claim found in the same way as the Supreme Court before it came out with its final ruling.
	As I said, the incompatibility that was found was around the right to a review, not the right to be removed from the sex offenders register. I can see why some listening to the debate-not the noble Baroness-might have misunderstood that. The Government were disappointed with the UK Supreme Court's ruling, but we take our responsibility to uphold the law seriously, and that includes human rights law. That is why, in deciding how best to respond to the Supreme Court, we put at the front of our consideration the rights of the law-abiding, those who have the right to live without fear of predatory sex offenders.
	In line with the comments of the noble Lord, Lord Lester, I was a little surprised at some of the points made by the noble Baroness, Lady Smith. The last Government established the UK Supreme Court and enshrined the European Convention on Human Rights in UK law via the Human Rights Act 1998. That marked a change to our constitution which I am sure that her party would point to as a big step forward. But the other reason I was surprised at her remarks was because, after the Statement that has already been referred to was repeated in this House, her noble friend Lord Hunt of Kings Heath, who is very distinguished, described in an Oral Question he tabled on 17 March 2011 the ruling of the Supreme Court as "eminently reasonable".
	Referring not just to the comments that have been made in the Chamber today but speaking more broadly, none of us likes to be told that those who have done wrong also have rights. I certainly respect people's anger and disappointment when they first learn about rulings which they feel will entitle people who they think of first and foremost as evil-the word used by the noble Lord, Lord Lester-to rights. However, a responsible Government have a responsibility to respond to that disappointment and anger with a proportionate way forward which meets people's concerns, and that is what we are doing.
	I turn now to some of the specific points that were raised and the questions put. The noble Baroness, Lady Smith, talked about inconsistency. As I have made clear on this remedial order to do with the sex offenders register, every UK court rejected the claim. I am sorry; I will start again by referring to prisoner voting rights, which she used to illustrate her claim of inconsistency. I have already said that every court in this land found in the same way as the UK Supreme Court with regard to the sex offenders register. On prisoner voting rights, every UK court that heard the claim that prisoners should have the right to vote rejected it. The only court that has found in favour of prisoners being given the right to vote is the European Court of Human Rights. There is a distinct difference and we are responding to the UK Supreme Court at this time.
	The noble Baroness made several points about the risks associated with offenders having a right to appeal to be taken off the sex offenders register. Perhaps I may cover several issues. The first thing to make clear is that, so far as this process is concerned, the onus is on the offender to come forward and make an application. The offender has to decide that they want to make the application: it will not be done for them automatically. In doing so, they must make clear to the police why they feel they have changed in a way that makes them a suitable candidate for review. In considering their response, the police will naturally consult the other agencies involved when someone is placed on the sex offenders register and will take time to consider each case on its merits.
	The noble Baroness, Lady Hamwee, asked about the rank of the officer who would consider this process: perhaps the noble Baroness, Lady Smith, did as well. I can confirm that the review will be carried out by a superintendent. That will be made clear in the statutory guidance on the review of indefinite notification requirements under Part 2 of the Sexual Offences Act, which we will publish once the order comes into force. This will stipulate that the determination as to whether an offender comes off the register or not will be made by an officer ranked at superintendent or above.
	The other important point relates in a way to the other statutory instrument being debated, and I will talk about that in more detail in a moment. Sex offenders who are on the register are categorised in different ways and are subject to a great deal of scrutiny and surveillance. This is not something that will be considered in isolation.
	The noble Baroness, Lady Smith, asked about what happens if an offender who had come off the register offends again. First, any failure to comply with the register is in itself an offence. Secondly, if the situation she described were to happen, the offender would be reconvicted and sentenced according to the crime they had committed. They would again be subject to notification requirements. There is no question whatever that an offender who has committed a crime will not be required to operate within the terms of the sex offenders register.

Baroness Smith of Basildon: The point I was trying to get at was whether someone who had been on the register as a convicted sex offender and had come off the register but was then convicted of a further sexual offence-but not one that would normally put them back on the register-would be put back on the register automatically.

Baroness Stowell of Beeston: I can follow up in writing if necessary, but these kinds of cases would be considered on their individual merits. If somebody had been on the sex offenders register for life, had succeeded in making an application for review and coming off the register, then committed a crime which would not automatically put them back on the register for life, then I would expect that the authority that made the decision to place them on the register would consider the fact that they were previously on the register for life. Someone who was put on the register for life and is then successful in having their case reviewed and comes off it will have done something which would, had the police known that they were about to do it, have disqualified them from coming off the register in the first place. Anything contrary to that would be surprising to me. If I need to do so, I will follow up in writing, but such a situation would not make a great deal of sense.
	The noble Baroness asked about why we had determined 15 years as an appropriate time for an offender to make an application for review. I think that I covered that carefully in my opening speech by explaining that the evidence suggests that a sex offender, if they are likely to reoffend, will do so in the first few years following their release from prison. The longer the period that has elapsed after their release is, the less likely it is that they will reoffend. As the noble Baroness pointed out, the available evidence suggests that there is no specific scientific point at which it can be absolutely guaranteed that someone will not reoffend, but if there is any suggestion that they might do so, they would not be successful in being removed from the sex offenders register in the first place when they made their application for review. We are talking about 15 years after this person has been released from prison.

Baroness Smith of Basildon: The impact assessment states that the figures relating to the reconviction rate of sex offenders covered a 25-year period, during which a quarter were reconvicted of a sexual offence. By the noble Baroness's understanding, there seems to be a period of less than 15 in which they do not reoffend, but the impact assessment says that a quarter reoffend within 20 to 25 years of conviction.

Baroness Hamwee: My Lords, this is a terribly complicated area and I am sure that noble Lords are, like me, struggling to follow the sequence of events. It would be really helpful if the noble Baroness were to write to us afterwards, because this involves quite technical details and I, for one, am having trouble putting them into the context of the original offence and on what the automatic and discretionary consequences of a conviction might be.

Lord Lester of Herne Hill: To be helpful, perhaps I may make another practical suggestion. I forgot to say that in its latest report the Joint Committee on Human Rights asked seven questions for clarification, all of which have been clarified by the Equalities Minister Lynne Featherstone in her letter of 15 June 2012 to the Joint Committee. They are important issues and, rather than trying to get them on the record here, it would be sensible if the letter I referred to or some other letter were copied to those who have taken part in the debate, put in the Library and made part of the public record. I do not want the Minister to have to face yet further questions tonight, given that it has all been dealt with satisfactorily but not widely read.

Baroness Stowell of Beeston: I am grateful to my noble friends. If that solution is satisfactory to the noble Baroness, Lady Smith, that is what I will do.
	Let me see if I can make some progress in responding to some of the other important points raised in the debate. The noble Baroness, Lady Smith, raised issues about costs. The straightforward point is that we have developed this policy in complete and full consultation with ACPO, which understands the need to respond to the Supreme Court ruling. There is no additional money available, but ACPO is confident that the aims can be met from existing resources. To return to a point made earlier, we have found it necessary for us to address this incompatibility, and that is what we are doing. It is worth adding that there is no option for the Government to appeal to the European Court of Human Rights against a ruling by the UK's Supreme Court. This is a finding by the UK Supreme Court. I have described as carefully as I can that we have acted in a way that will address its findings, but in a way that is also mindful of the rights of law-abiding citizens who have every right to be protected from predatory sex offenders. I think those were the main issues raised by the noble Baroness.
	My noble friend Lady Hamwee asked why we had taken the course of a remedial order as opposed to primary legislation. My noble friend Lord Lester answered that quite comprehensively, so I will not repeat all that he said. As for my noble friend Lady Hamwee's concerns about the police leading on this review as opposed to the courts, I have already acknowledged that this has been a point of debate with the JCHR, which has now found that our proposals are compatible. None the less, it is worth stating clearly that we firmly believe that the police are in the best place to carry out this review and to consider an application from an offender on the register. They are familiar with the issues locally and will continue to work closely with the other agencies who are all working hard to ensure the protection of people in their area.
	My noble friend asked whether the offender would get an oral hearing. My understanding-and if I am incorrect I shall, of course, write to her-is that they will not get an oral hearing with the police; they will put forward their application and the police will make a decision. However, they have the right to appeal that decision to the magistrates' court. The noble Baroness also made the point that she expected all offenders to seek a review of their place on the register. In response, I remind the noble Baroness that they are not entitled to do so until they have been on the register for 15 years after their conviction. So even if that was to be the case-and I am sure that many offenders will recognise that their application may not be successful anyway, which might dissuade them from putting themselves forward for a review-they will not all put themselves forward at the same time.
	As to the other order before us and the various questions raised, primarily, by the noble Baroness, Lady Smith, about the notification requirements, she asked about consistency with the devolved Administrations. I will restate that this is a devolved matter and Scotland and Northern Ireland are able to reach their own decisions. However, we are liaising closely with the devolved Administrations and ensuring that we seek alignment between the systems of notification. Northern Ireland is taking steps to change the law and we are liaising directly to ensure as much consistency as possible, particularly on this issue of three days, as the noble Baroness raised. As to European Union countries, we took into account aspects of their review mechanisms. In our view the UK very much leads in sex offender management, but we have taken any action that is taken in other countries which we think is appropriate. However, we would rather ensure that our action is consistent with our own standards, to be at the forefront of this matter.
	Before I close, perhaps I may respond to the noble Baroness's comments about online identities. It is already a requirement for all offenders to notify the police of any alias that they use. None the less, the crimes to which she referred are very serious. I would prefer to respond to her separately on the matter of online identities, but the noble Baroness has given me the opportunity in raising it to say that a range of tools is available to the police to manage dangerous offenders, including sexual offences prevention orders, or SOPOs, which are intended to protect the public from the risk posed by sex offenders by placing restrictions on their behaviour. These orders can be made on application to a magistrates' court. If somebody on the sex offenders register is doing something which gives rise to suspicion that they are about to commit a crime, it is possible for the police to get the necessary authority for them to take action. I wanted to take this opportunity to make that point because there is a risk when we talk, as we have today, exclusively about the sex offenders register that the public might be given the impression that the register is the only way in which we manage sex offenders. It is not-there is a comprehensive set of arrangements.
	The Sexual Offences Act 2003 is important legislation that provides police and other agencies with essential tools and powers to ensure that they can effectively manage offenders who pose a risk to the public. I am proud to say that the United Kingdom has one of the most robust sex offender management systems in the world and these changes will ensure that it continues to do so. I commend the order to the House.
	Motion agreed.

Sexual Offences Act 2003 (Notification Requirements) (England and Wales) Regulations 2012

Copy of the SI
	Copy of the Report

Motion to Approve

Moved By Baroness Stowell of Beeston
	That the draft regulations laid before the House on 5 March be approved.
	Relevant document: 43rd Report from the Joint Committee on Statutory Instruments, Session 2010-12.
	Motion agreed.

Terrorism Act 2000 (Proscribed Organisations) (Amendment) Order 2012

Copy of the SI

Motion to Approve

Moved By Baroness Stowell of Beeston
	That the draft order laid before the House on 2 July be approved.

Baroness Stowell of Beeston: My Lords, the Government are determined to do all that they can to minimise the threat from terrorism to the UK and our interests abroad. Proscription of terrorist organisations is an important part of the Government's strategy to tackle terrorist activities. We would therefore like to add the organisation, Indian Mujahideen-IM-to the list of 47 international terrorist organisations that are listed under Schedule 2 to the Terrorism Act 2000. Having carefully considered all the evidence, the Home Secretary's firm belief is that IM meets the statutory test for proscription and that it is appropriate to exercise her discretion to proscribe it. This is the 10th proscription order amending Schedule 2 to that Act.
	Section 3 of the Terrorism Act 2000 provides a power for the Home Secretary to proscribe an organisation if she believes that it is currently concerned in terrorism. The Act specifies that an organisation is concerned in terrorism if it: commits or participates in acts of terrorism; prepares for terrorism; promotes or encourages terrorism, including the unlawful glorification of terrorism; or is otherwise concerned in terrorism. If the test is met, she may then exercise her discretion to proscribe the organisation. In considering whether to exercise this discretion, she takes into account a number of factors which were announced to Parliament during the passage of the Terrorism Act 2000. The factors considered are: the nature and scale of an organisation's activities; the specific threat that it poses to the United Kingdom; the specific threat that it poses to British nationals overseas; the organisation's presence in the United Kingdom; and the need to support other members of the international community in tackling terrorism.
	Proscription is a tough but necessary power. Its effect is that the proscribed organisation is outlawed and unable to operate in the UK. Proscription makes it a criminal offence for a person to belong to, or invite support for, the proscribed organisation. It is also a criminal offence to arrange a meeting in support of a proscribed organisation or to wear clothing or carry articles in public which arouse reasonable suspicion that an individual is a member or supporter of the proscribed organisation. Given the wide-ranging impact of proscription, the Home Secretary exercises her power to proscribe an organisation only after thoroughly reviewing all the available relevant information on the organisation. This includes open source material as well as intelligence material, legal advice and advice that reflects consultation across Government, including with intelligence and law enforcement agencies. Decisions on proscription are taken with great care by the Home Secretary and it is right that both Houses must approve the order proscribing a new organisation. Having carefully considered all the evidence, the Home Secretary firmly believes that IM is concerned in terrorism. Noble Lords will appreciate that I am unable to go into much detail of the evidence but I am able to summarise.
	IM uses violence to achieve its stated aims of creating an Islamic state in India and implementing Sharia law. The organisation has frequently perpetrated attacks against civilian targets, such as markets, with the intention of maximising casualties. For example, in May 2008 a spate of bomb detonations in the city of Jaipur killed 63 and in September 2011 an explosion outside the High Court in Delhi reportedly killed 12 and injured 65. IM has sought to incite sectarian hatred in India by deliberately targeting Hindu places of worship. For example, an attack during a prayer ceremony in Varanasi killed a child in December 2010. The group also targets areas popular with tourists. For example, a shooting incident outside a tourist attraction in Old Delhi wounded two Taiwanese tourists in September 2010. The group also made an unsuccessful attempt to detonate an explosive device at the scene. The organisation has threatened to attack British tourists, so it clearly poses a threat to British nationals in India.
	The proscription of IM will contribute to making the UK a hostile environment for terrorists and their supporters and will signal our condemnation of the terrorist attacks this group continues to carry out in India. IM is already banned by the United States, India and New Zealand; thus proscription will align the UK with the emerging international consensus. Proscription is not targeted at any particular faith or social grouping but is based on clear evidence that an organisation is concerned in terrorism. IM has carried out a large number of attacks in India, resulting in large numbers of civilian casualties.
	I have already said that the Government recognise that proscription is a tough power that can have a wide-ranging impact. Because of this there is an appeal mechanism in the legislation. Any organisation that is proscribed, or anyone affected by the proscription of an organisation, can apply to the Home Secretary for the organisation to be deproscribed. If refused, the applicant can appeal to the Proscribed Organisations Appeal Commission, a special tribunal which is able to consider the sensitive material that often underpins proscription decisions. A special advocate can be appointed to represent the interests of the applicant in closed sessions of the commission. There is ample evidence to suggest that IM is concerned in terrorism and I believe it is right that we add the organisation to the list of proscribed organisation under Schedule 2 of the Terrorism Act 2000. I beg to move.

Baroness Smith of Basildon: My Lords, as the noble Baroness pointed out, the order before us today proposes that the Indian Mujahideen-IM-joins the list of 47 international terrorist organisations proscribed in the UK. I understand that a much smaller group of organisations operating in Northern Ireland is also proscribed.
	It is a very serious matter for an organisation to be proscribed. It makes it an offence to be a member of that organisation, to support the organisation, to invite others to support the organisation or wear the uniform of the organisation. The uniform is not what we might think of in the traditional sense, but to wear clothes which might indicate that an individual supports that organisation. As the noble Baroness said, it is right that a decision to proscribe an organisation is never taken lightly. The consequences of proscription are serious, not least because it potentially criminalises every member of that organisation or group, so it must be reserved for the most dangerous groups, where there is clear evidence of terrorist activity.
	Under Part 2 of the Terrorism Act 2000, a group can be proscribed only if the Home Secretary believes that the organisation,
	"commits or participates in acts of terrorism".
	I have read the information available about the organisation and listened to the noble Baroness, and we are confident that there is evidence to support proscription of the organisation, so we will support the order.
	It is clear that the Indian Mujahideen is a terrorist organisation. The noble Baroness gave examples of the most appalling terrorist attacks that have taken place in recent years. It also shares responsibility for the general decline in security in parts of the Indian subcontinent. The group rose to prominence in 2007, but has been active since about 2001. I was looking at the background and history of the organisation. The noble Baroness will be aware that there are strong links between IM and the Students Islamic Movement of India, which was first identified back in 1977. I am not clear, and I am not sure that there is absolute clarity, about the exact nature of the relationship between the two organisations, but from what I have ascertained, the relationship between them may mean that their membership is fluid-if they are two separate organisations.
	That is important because the Government have not included the Students Islamic Movement of India in the order. Was consideration given to including that organisation and do the Government consider that it is also a terrorist organisation? If the membership of those two organisations is that fluid, could members of the IM put themselves beyond the scope of the order by an IM branch or individuals converting back to the Students Islamic Movement of India and just change their membership? I am sure that that is not what the Government intend, but it would be helpful to have assurances that there is no such loophole in the order and that the Government have considered the issue and are confident that terrorists will not be able to evade the force of law through a legal technicality.
	As the noble Baroness said, to proscribe an organisation, it is not sufficient that it be involved in terrorism. The Home Secretary has to take account secondary considerations. She repeated them, and they are in the Explanatory Notes. She said that the Secretary of State announced them in 2000, but the Explanatory Notes state that they were announced in 2001, so we may need clarification that we are talking about the same criteria.
	Is the decision to proscribe the organisation now the direct result of evidence suggesting an increase in the scale of IM's activity? Can she-I appreciate that she may not be able to-say anything about the nature of the threat? I am particularly interested whether there is a specific threat from the organisation to UK citizens abroad or within the UK. Given the strong links, associations and connections between IM and the Students Islamic Movement of India, what is the Government's assessment of either group's activity in the UK and whether there is evidence of links between IM and other proscribed groups within the UK?
	The final criterion in the Explanatory Notes to the order which the Minister mentioned is the need to support other members of the international community in the global fight against terrorism. The UK has proscribed the organisation now following action already taken by India, New Zealand and the USA. What discussions have there been with these other countries? Was the UK asked to take this action by India and did the discussions that took place include references to the role of other organisations which I mentioned, such as the Students Islamic Movement of India? Are there also European consequences? I am not aware that any other European countries have proscribed or banned this organisation and I wonder whether the Government are in contact with our European allies on this.
	Perhaps I might also ask one brief question about Hizb ut-Tahrir. The noble Baroness will be aware that before I came to this place I was in the other House for 13 years. At one point, during the first two years of Gordon Brown's premiership, I was his parliamentary private secretary. I recall clearly that on Gordon Brown's first outing at Prime Minister's Questions, which is almost five years ago to the day, David Cameron, the then leader of the Opposition, chose proscription as his first topic for Prime Minister's Questions. What Mr Cameron said then was very critical of the Labour Government. He said that Hizb ut-Tahrir,
	"should be banned-why has it not happened?".
	When it was pointed out that evidence was required, Mr Cameron criticised that and said:
	"What more evidence do we need before we ban that organisation? ... when will this be done? ... People will find it hard to understand why an organisation that urges people to kill Jews has not been banned".-[Official Report, Commons, 4/7/07; cols. 951-2.]
	As I said to the noble Baroness, these are very serious issues and it is not appropriate to have shouty debates across the Dispatch Box on them, as we had on that occasion. However, can she confirm whether she knows whether the Prime Minister still holds the view that he held about five years ago? Are we likely to see a further order coming forward concerning that organisation? These are serious matters, and I know that decisions to bring forward such orders are not taken lightly without examining evidence. However, I can tell the noble Baroness that this order has our support.

Baroness Stowell of Beeston: My Lords, I am grateful to the noble Baroness for her comments and very much welcome her support. She obviously made a number of points, which I will endeavour to respond to. However, I am sure she will appreciate that this being the matter it is, there is a limit to what I can say because of the sensitivities of what is under consideration. As I said and as the noble Baroness restated, there is a very clear process in the Terrorism Act 2000 that is followed before any decision is made by a Home Secretary to proscribe a group. The noble Baroness asked, as a point of clarification, whether the other factors that the Home Secretary considers were first stated in 2000 or 2001. I can confirm that they were stated in 2000, so wherever the discrepancy is we will make sure that that is properly addressed and corrected.
	Most of the noble Baroness's comments were linked to the Indian Mujahideen and she suggested some connections between that group and another, the Students Islamic Movement of India, which also goes by the name of SIMI. As she will understand, I am afraid that it is not possible for me to comment on intelligence matters. We keep the list of proscribed organisations under regular review but, if I might give her some assurance, if there is evidence that the IM has reformed itself under a different name, any new name will be subject to the same process of consideration for proscription. The use of an alternative name that is not listed does not prevent the police and Crown Prosecution Service taking action against an individual for proscription offences. There is a body of open-source information on links between IM and SIMI, but this is not necessarily information which we would endorse.
	The noble Baroness raised questions about Hizb ut-Tahrir in particular. Before I respond to that specifically, it is worth pointing out that it is essential that when the Government-or any Government-take action to proscribe or ban a group, they have sufficient evidence to ensure that however great the revulsion at what people are doing, action is taken under the letter of UK law and that we have sufficient evidence of that law being breached. If not, when these people appealed, it could be a propaganda coup for them if we were to take action that failed.
	Hizb ut-Tahrir is an organisation that the Government have significant concerns about. We will continue to monitor its activities closely. Such groups are not free to spread hatred and incite violence as they please. The police have comprehensive powers to take action under criminal law to deal with people who incite hatred, and they will do so. We will ensure that HUT and groups like it cannot operate without challenge in public places in this country; we will not tolerate secret meetings behind closed doors, on premises funded by the taxpayer. We will ensure that organisations are made well aware of HUT and of groups like it, the names under which they operate and the ways in which they go about their business.
	The noble Baroness asked me about consultation with our European partners. The UK has the largest Indian population in Europe, as I am sure she knows. Other EU member states have tended to follow the UK's lead in matters like this. She asked whether any European Union countries had proscribed IM. None has, but we do not necessarily wait to be led in this context.
	I shall see whether there is any issue raised by the noble Baroness that I have not covered, but I think that has covered everything. I repeat my thanks and I welcome her support for the order.
	In conclusion, I strongly believe that IM should be added to the list of proscribed organisations under Schedule 2 to the Terrorism Act 2000. IM has carried out a large number of indiscriminate mass casualty attacks in India. It has also sought to incite sectarian hatred in India by deliberately targeting Hindu places of worship. The number of victims of this organisation is over 150 and it is essential that we show our condemnation of its actions.
	Motion agreed.

Fishing Boats (Satellite-Tracking Devices and Electronic Reporting) (England) Scheme 2012

Copy of the SI
	Copy of the Report

Motion to Approve

Moved By Lord De Mauley
	That the scheme laid before the House on 24 May be approved.
	Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.

Lord De Mauley: My Lords, the sustainability of global fish stocks is currently a matter of considerable concern. That sustainability depends in great part upon effective control and reliable data to inform the science. The electronic transmission of both satellite position reports-or VMS, vessel monitoring systems-and fishing activity reports in the form of electronic logbooks, forms an essential element of modern fisheries control. It is used more and more throughout the world to monitor fishing activity. The old paper-based systems of logbooks and landing declarations are both cumbersome and time-consuming for fishermen to complete. The input of the data from these paper records on to computerised databases is also resource-intensive for fisheries administrations.
	Under EU law, the requirement to have this electronic equipment has now been extended from fishing vessels over 15 metres to fishing vessels over 12 metres. Extension of the technology to smaller vessels will significantly improve the monitoring in real time of fishing activity, as logbook information will be transmitted back to shore on a daily basis, rather than having to wait for the vessel to complete its trip, as at present. It will also greatly increase the risk of detection of attempts to misrecord catches and so contribute positively towards improving compliance and ensuring the sustainability of fish stocks.
	The benefits of this new technology are therefore clear. Essentially, though, electronic logbooks and satellite tracking devices are control tools. Because of that, the Government have contributed towards their capital cost in the past. We think it right to continue to do so, and the new scheme therefore provides funding to smaller fishing vessels as required by Community law. It also allows for the funding of the installation of similar technology on vessels below 12 metres, should a decision for that be taken in future.
	The Government are pleased to be able to offer financial assistance to fishermen in the purchase of the necessary VMS hardware and electronic logbook software. Similar assistance is being provided by other fisheries administrations in the UK and other member states. In England, the scheme will be administered by the Marine Management Organisation.
	For VMS, we have appointed a single supplier of the equipment. However, for the electronic logbook software we have aimed to ensure best value for money by adopting a type approval process under which any software supplier can submit a product for approval. Six software systems have so far been approved. This will offer fishermen a choice of software to meet their own needs and introduce competition between suppliers.
	Grant aid will be made available only for approved software systems. I nevertheless recognise that some fishermen may wish to purchase more sophisticated software that contains functions beyond those necessary to comply with our EU obligations. It is therefore reasonable to place a cap on the level of financial assistance that the taxpayer will provide, so we propose to limit the total amount of funding that will be available to English fishing vessels to £4,500 per vessel. On this basis, the overall cost of the funding scheme is not expected to exceed £770,000 for the 170 or so English vessels over 12 metres, and 90% of this is recoverable from Community funds under the EU aid regime, which provides cofinancing for member states' expenditure on statutory control measures. The remaining amounts will be found from existing budgets.
	We believe that the relatively modest costs of this scheme will deliver real benefits to both fishermen and fisheries administrations, so the scheme will provide real value for money. I beg to move.

Lord Knight of Weymouth: From the outset, my Lords, I make it clear that we do not oppose the draft scheme. Following the extension of Council regulation 1224/2009, it is clear that a funding scheme is needed to provide for payment to obtain the necessary equipment, and that the installation of satellite tracking devices and electronic logbooks on board fishing vessels is a positive step in promoting better working practices across the industry. We hope that the transition to an electronic system will provide a more effective and efficient method of determining what fish are caught and what location the stocks are fished from and, potentially, to address the difficult problem of discards, which many of us find repugnant. Any steps that are taken to improve industry standards to ensure the preservation of fish stocks will be wholeheartedly supported on this side, as are any measures for better working standards across the industry.
	I do not wish to detain your Lordships' House. I shall merely ask a couple of questions that were asked by my honourable friend Gavin Shuker in the other place which the Minister who was on duty, James Paice, did not have an opportunity to respond to, and I will be delighted if the Minister wants to respond in writing. When will the scheme be implemented, and have the Government set in place a timetable for the completion of the works? Has the EU set a deadline on carrying out this widening of the regulations, and will the Government be able to meet it? As I said at the beginning, though, we do not oppose this draft scheme and indeed welcome many of the elements of it. Any clarification of the details would be welcome.

Lord Hunt of Chesterton: My Lords, will the information that comes from this system be open or will it be completely secure to the MMO? Will it be possible, for example, to use that information to see all the other ships in our coastal waters coming from different countries in Europe, which causes considerable difficulty?

Lord De Mauley: My Lords, I am grateful to both noble Lords who have participated for their contributions. I am particularly grateful to the noble Lord, Lord Knight, for saying that effectively he agrees to the proposals. As I said at the outset, the use of this technology on smaller vessels will significantly improve the reliability of catch data and reduce the opportunity to cheat for those few who are inclined to do so. This can only be good for fish stocks. The modest costs of delivering these improvements in the way in which fisheries data are gathered are therefore, I suggest, justified.
	The noble Lord, Lord Knight, referred to discards. I share his abhorrence of discards. Discussions are under way as part of negotiations towards reform of the common fisheries policy. We hope to conclude these early next year. He asked about timing. All the equipment will be installed by the end of the year. That is a little late, but it is not later than in many other member states. As to the openness of the information, about which the noble Lord, Lord Hunt of Chesterton, asked, for those other nations that need access to the information for purposes of monitoring our vessels in their waters-just as we will need to monitor their vessels in their waters-that information will be so shared. I am grateful to him for his comments and if I can add to that reply I will write to him. I hope that noble Lords can accept this scheme.
	Motion agreed.

House adjourned at 6.41 pm.